Corporate Accounting and Reporting: Lease Accounting Under AASB 16

This report provides a comprehensive analysis of corporate accounting and reporting, focusing on the impact of AASB 16 on lease accounting. It discusses the classification of leases, the treatment of operating and finance leases, and the principles applied in the financial statements of lessors. The report also covers the accounting for sale and leaseback transactions and the disclosure requirements for lessors under AASB 16. Furthermore, it distinguishes between contracts for the use of assets and contracts for services, highlighting the importance of understanding these distinctions in applying accounting standards. The document concludes with a discussion on financial statement preparation and the implications of the new accounting standards. Desklib is a platform where you can find similar solved assignments and past papers.

Running head: CORPORATE ACCOUNTING AND REPORTING
Corporate Accounting and Reporting
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1CORPORATE ACCOUNTING
Table of Contents
Part A............................................................................................................................2
Part B............................................................................................................................6
References...................................................................................................................8

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Part A
Introduction
AASB 16 states that leases basically alter the monetary reporting background
for in what way lessees account for operating leases. As soon as new standards
come in effect it removes the classification regarding the operating leases as well as
the requirement on the part of all lessees in order to reflect it as a liability lease along
with the corresponding right to use the asset. The company is required to conclude
the necessary actions to be taken in order to finalise the preparation of financial
statement as per the applicability of new accounting standard. The modification
could be complex that effect could be outside the treatment level of accounting. As
the selections completed will disturb the approach the presentation of the
commercial is restrained and stated, it is energetic to deliberate not simply the
profitable and appliedproblems, but correspondingly the tax consequences of these
variations.

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Discussion
The grouped of leases accepted in the Standard is constructed on the scope
to that risks as well as the rewards that are incidental to possession of constructed
assets to with the lessor. Risks comprise the potentials of lessees from idle capacity
or technical uselessness and of dissimilarities in reappearance due to altering
economic situations. A lease is classified as business lease if it assignment
significantly all the hazards and plunders occurrence to possession. An operating
lease is occupancy further than a finance lease. The lease is only termed as non-
cancellable lease at the occurrence of some isolated eventuality, if the lessor gives
the permission for cancellation, or there is new lease agreement related to similar
asset among other lessor and upon the imbursement made by the lessee of a
supplementary quantity such that, at beginning, continuance of the occupancy is
sensibly convinced (Aasb.gov.au 2019).
The commencement of the lease is the previous day of the lease contract or
of a assurance by the gatherings to the main requirements of the lease. The lease
period is the non-cancellable period for that the lease has measured to occupy the
asset collected with several additional relationships for associating the lesser has the
possibility to endure to tenancy of the assets with or deprived of additional
disbursement, which selection at the beginning of the occupancy it is rationally
convinced that the occupant will work out. Least possible lease expenditures are the
expenses over the occupancy period that the occupant is, or be able to be
compulsory, to brand exclusive of depending payment, prices for facilities and duties
to be remunerated by and refunded to the lessor. Fair price is the sum for which an
asset might be swapped or accountability established, amongst experienced, within
gatherings in an armrest’s measurement deal (Kilshaw 2013).

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As per AASB 117, the below stated are the principles that is been applied in
the case of fiscal statement of lessors.
 As soon as the term of lease commence, the lessor is responsible to record
the monetary lease on the balance sheet under receivables that the amount is
equivalent to net investment in the lease.
 The lessor is liable to identify fiscal proceeds that are based on an outline that
is reflecting a continuous timely rate of return on the lessor’s net investment
that is being outstanding in reference of the fiscal lease.
 Assets apprehended for operating leases ought to be accessible in the
balance sheet of the lessor rendering to the feature of the asset. [IAS 17.49]
Lease income must be documented over the tenancy period on a traditional-
line base, except additional methodical base is more illustrative of the period
arrangement in which use advantage is resultant from the rented asset is
moderated (Aasb.gov.au 2019).
As per AASB 117, Manufacturers or dealer lessors ought to comprise sales
income or loss in the similar dated as they would for an absolute sale. If in sincerely
low-slung charges of attention are charged, retailing revenue must be limited to that
which would put on if a profitable percentage of interest were charged. After the
standard has been amended the incremental cost as well as initial direct cost that is
incurred by lessor for negotiating the leases it shall be identified over the term of
lease. That might no longer to record under expenses as on when it is incurred. This
treatment is not applicable for lessors dealing in manufacturing and dealing purposes
as those cost identification under expense as soon as the selling profit is identified.

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The auction of an asset correspondingly its subsequent leasing by the
previous proprietor must be accounted for in a method replicating the material of the
communications when understood as a set. The real secretarial action will be
contingent upon the kind of lease complicated. If an auction as well as leaseback
business outcomes in a finance lease, several surplus of auctions in comes
concluded the carrying sum ought to be delayed and pay back in excess of the lease
period. An operating lease in addition is recognised at fair price, any revenue or loss
ought to be accredited instantly (Aasb.gov.au 2019).
According to AASB 16, a lessor will disclose all the qualitative as well as
quantitative data regarding the leasing activities so as to meet the essential
requirement of the standard. The additional data is inclusive of but is not complete to
data that helps in assessing the statement to its users. The risk management done
by the lessor is also retaining the right that is being possessed through asset. The
feature of leasing is also depended. In specific, a lessor will reveal its risk
organisation plan for the privileges it recalls in fundamental possessions, counting
any incomes by which the lessor decreases that risk. Such incomes may comprise,
for instance, buyback contracts, outstanding value assurances or adjustable lease
expenditures for usage in extra of quantified restrictions (Moussaly and Wang 2014).

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Conclusion
Accounting in case of leases applies to the contracts that give the right for
using an asset straight however considerable facilities by the lessor might be called
for in adaptation with the process or preservation of such assets. This standard is not
applicable to those agreements that are contracts for facilities that shall not handover
the right to use assets from another party to the other.
Part B

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References
Aasb.gov.au. (2019). [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 25
Jan. 2019].
Islam, M.A., Islam, M.R. and Siddiqui, M.H., 2014. Lease financing of Bangladesh: A
descriptive analysis. International Journal of Economics, Finance and Management
Sciences, (1), p.2.
Kilshaw, R.J., 2013. System for enabling consumers to evaluate automobile leases.
U.S. Patent 8,392,280.
Kolpak, E.P., Gorynya, E.V., Shaposhnikova, A.I., Khasenova, K.E. and
Zemlyakova, N.S., 2016. Special aspects of leasing activities and its meaning in
conditions of enterprise competitiveness. International Review of Management and
Marketing, 6(6S), pp.126-133.
Moussaly, K. and Wang, W., 2014. The Impact of Leased and Rented Assets on
Industry Productivity Measurement. Statistics Canada= Statistique Canada.
Treasury.nsw.gov.au., 2019. [online] Available at:
https://www.treasury.nsw.gov.au/sites/default/files/2017-04/Guidance%20for
%20AASB%2016%20Leases%20-%20New%20Lease%20Standards.pdf [Accessed
25 Jan. 2019].
Wong, K. and Joshi, M., 2015. The impact of lease capitalisation on financial
statements and key ratios: Evidence from Australia. Australasian Accounting,
Business and Finance Journal, 9(3), pp.27-44.