ACCG224 Financial Reporting: Woolworths Limited & New Lease Standard

This report examines the potential impact of new accounting standards, particularly AASB 16 Leases, on Woolworths Limited's financial statements. It discusses the shift from operating to finance leases, the implications for lease liabilities, and the potential changes in expense calculations. The report evaluates the benefits of leasing, such as avoiding large cash outflows and protecting against residual value risk. It concludes by emphasizing the importance of regularly scanning accounting models and adapting to new trends for competitive advantage, referencing Woolworths' 2017 Annual Report and other relevant financial accounting resources.

Financial Accounting and
Reporting

Introduction
New accounting standard is going to make several
changes in the financial statements of many
organizations
The major focus will be on the removal of the
distinction between the operating and financing
leases.
Woolworths is selected and Consolidated
Statement of Financial Position or performing
leases is studied

Description of lease
• AASB 16 Leases will disengage current accounting
necessity for leases under AASB 117 leases
• The motive of the project is to assure high-quality
performance in agreement with the accounting
standard (Porter & Norton, 2014)
• The group has set up or has been bound to get a
non-avoidable and non-discounted operating
lease that would amount to be $24,438.8 million
(Woolworths limited, 2017)

Potential impact
• there are rules that state to make future
payments under an operating lease agreement
which is not depicted in the balance sheet
(Woolworths limited, 2017)
• Changes in the accounting standards will also
result in the valuation of lease liability
• Application of this new standard will not only
help the organization to represent the financial
position of business (Porter & Norton, 2014)

• The new standard is said to change the nature
of expenses
• The expenses will not be calculated on a
straight line rental expense but will be
calculated on the basis of early years and
estimated profits (Ross et. al, 2014)
• The organizations may also face serious to
become incompetent in front of banks which
could lead them to various possible breaches

Evaluation
• Lease not helps the company to own the asset
without incurring large cash outflows
• It enables it to protect the asset from residual
value risk
• All the lease liabilities are measured in relation
to the lease terms which further helps to
decide the extension period of a lease
(Vaitilingam, 2014)

Conclusion
• Accounting model and areas must be scanned
regularly which are competitive in nature
• This will lead to changes that are to be
brought and understood
• Companies need to be updated and follow the
new trends as soon as possible

References
Porter, G. and Norton, C. (2014) Financial Accounting: The
Impact on Decision Maker. Texas: Cengage Learning
Ross, S., Christensen, M., Drew, M., Bianchi, R., Westerfield,
R. And Jordan, B.(2014) Fundamentals of Corporate Finance,
7th ed. North Ryde: McGraw-Hill Australia Pty Ltd.
Vaitilingam, R. (2014) The Financial Times Guide to Using
the Financial Pages. London: FT Prentice Hall.
Woolworths limited. (2017) Woolworths limited Annual
Report and accounts 2017. [online] Available from:
http://www.woolworthslimited.com.au/icms_docs/182381_
Annual_Report_2017.pdf
[Accessed 2 October 2018]