+91-9519066910

Sample

Accounting Theory Current Assignment Help

UK Assignment Help

Accounting Theory Current Assignment Help

Rating:

ACCOUNTING THEORY AND CURRENT ISSUES

Abstract

The report states the purpose of the requirement of modification of the previous accounting standard for the leases to the current lease (AASB 117 to AASB 16). The report describes the shortcomings that led to the necessity of such modification. The requirement of the positive accounting theory in terms of the managerial perspective is also well attended in the report. The report caters to the modification that the companies similar to Accent Group Limited required to implement for the transition of the standard. The report also gives an overview of IASB with relevant examples. The report also states the actions taken by Accent Group Company due to the transition of the accounting standards.

1. Introduction

The report aims at the understanding and analyzing critically the Lease Accounting Standard. The fresh Financial Accounting Standard for lease AASB 16 has been critically examined in the report. The report also critically evaluates the traditional Lease Accounting Standard (AASB 117) highlighting specifically the shortcomings of the lease standard. The reason for the change being mandatory has also been well attended in the report. The report also caters to the changes that have been modified in the fresh Lease Accounting Standard for ASSB 16. The view of the IASB for the incorporation of IFRS 16 which is supposed to enhance the comparison between the companies which borrows to purchase assets and the companies which lease assets has been explained. The report also casts the provision and effect of the transition of AASB 117 to AASB 16 taking the example of a company named Accent Group Limited.

2 Evaluate critically the previous lease accounting standard (AASB 117) highlighting specifically the shortcomings 

As per the findings, it is evident that the previous lease accounting standard (AASB 117) fell short of classifying the finance or the operating as well as the lease itself. It has also been found that if the classification of the lease included the operating structure yet the previous accounting standard fell short of the asset or the liability within the balance sheets. The previous accounting standard has been found to provide only the lease payments that included the expense in loss or profit. It has been checked that the operations related to the accounting of lease require many complex scenarios that needed to be handled which the previous lease standard failed. Therefore, the lease standard proves itself to be incapable of consideration in financial accounting purposes. Moreover, it was found that some of the operating leases could not be cancelled which proved to become a liability for the renter (Aasb.gov.au, 2019). The cancellation of irrelevant or rather less important operating leases are required to be included within the accounting standard for the lease (AASB 117) but it failed to meet the requirement. 

It has also been found that the liabilities of the statements based on finance were concealed from its readers which led to the breach of transparency. The breach in the transparency of the financial statements definitely failed to keep the requirement of the people. It has also been observed that few disclosures within the notes of the statements of finance proved its necessity but to dismay, the notes were not read by the people other than the auditors (Aasb.gov.au, 2019). The lease for the accounting standard (AASB 117) included the notes that were of less importance to common readers except the auditors thus it failed to keep up to the expectations of the mass people. Therefore, the previous accounting standard for the lease (AASB 117) faced the aforesaid shortcomings. 

3. The change being mandatory 

The previous accounting standard for the lease (AASB 117) required following the transition phase due to the following reasons as mentioned below:

Failed to classify the lease: The previous accounting standard for the lease (AASB 117) failed to classify the lease and distinguish between the finance lease and the operating lease. This proved to be very difficult not only for the auditors but also for the companies for their lease contracts (Hlb.com.au, 2019). This required to be modified based on the requirements of the users who were basically the auditors, the companies and the common people.

Lessees did not list the asset or liability in the balance sheets of the operating leases: It has been reckoned that the lessees did not list the assets or the liabilities for the operating leases within the balance sheets. They only listed the payments of the lease that included the loss or profit (Ifrsbox.com, 2019). This proved to be difficult in understanding during the audit and thus required to be changed or modified. 

Operating Leases could not be cancelled: The operating leases could not be cancelled that proved to become the liability for the lessees. This proved to become tough for the lessees to perform financial operations in the fear of getting liable for the operating leases that were of less importance (Hlb.com.au, 2019). Thus, this required to be changed or modified as per the requirement of the lessees.

Liabilities remained opaque: The liabilities were not transparent for the readers of the statements related to the finance due to the fact that the liabilities did not require its presentation anywhere. This lead to the breach of transparency which was mandatory to be altered and thus arose the need for a new accounting standard required the replacement that excluded such kind of breaches (Deloitte.com, 2019).

Included notes related to the financial statements that were not read by the lessees: The previous accounting standard for the lease (AASB 117) included notes related to the statements for finance that were only read by the auditors. This led to the fact that the disclosure of notes proved to be of less importance and can be illustrated elsewhere (Ifrsbox.com, 2019). 

According to the above reasons, the previous accounting standard for the lease (AASB 117) required alteration and the changes were done in the new accounting standard for the lease (AASB 16).

The change of the lease contract from AASB 117 to AASB 16 is likely to lay impact to few extents on every kind of business of the companies. The vital aspect that was included in the fresh accounting standard is the fact of being prepared and proactive. The fresh accounting standard included the costs that were related to the leased asset and also the related benefits on the balance sheet of the business (Iasplus.com, 2019). Previously, it was noted that the traditional accounting standard failed to list the assets or the liabilities and only included the lease payments in terms of the loss or the profits.

The fresh accounting standard AASB 16 is modified that represents the financial position of the business more accurately. The representation includes all the liabilities of the business and thus provides more relevant data in the financial reporting for the shareholders and the investors. It is expected that the balance sheets of the companies are to be modified and thus the companies require explaining the shareholders, financiers and the investors for the purpose (Iasplus.com, 2019). Moreover, the change will lead to the integration with the business departments and lead it to function the financial reporting and enter into agreements of the lease.

According to the PAT theory, it can be well understood that the theory deals with the change of the policies with respect to the alterations in the real-life scenarios. Thus, the implementation of this theory by the managers helps to adjust to the changing scenarios through the planning of a relevant accounting policy (Boiral, 2016). Moreover, it has also been found that PAT theory supports the operating lease that helps a company to be provided with cost flexibility.

7. Explain the overview of IASB with relevant example

According to the IASB, the prime purpose that led to the implementation of AASB 16 was due to the fact that the board tried to improve the compatibilities among the companies. It was reckoned that the IFRS 16 helps to give a more reliable presentation of the liabilities and the assets of the company in terms of high transparency depending upon the company’s financial advantage. The improvement comparability lies mainly within the hands of the investors that can be provided as the best example. In respect to an example, the amount noted on the balance sheet of the renter along with the income statement can be adjusted based on the will of the investors and the analysts. Another example that can be provided with respect to the implementation of IFRS 16 is based on the information of non-GAAP providence about leases. The implementation of IFRS 16 can help in laying a proper view over the context and thus help in the implementation of the organisational operation.

The implementation of the AASB 16 helps as per the view of the IAFB lies in the aspects such as the cost borrowing and the debt covenants. The transition of the AASB accounting standard did not lay much impact on the economic position of the company as well as it also did not affect much on the pay cash that is considered typically by the lenders. As per the IAFB, the implementation of the IFRS 16 proves to provide with the best results in the cost borrowing and thus, helps to improve the decision-making process. The improvement of the decision-making process helps in gaining transparency of the company’s finance.

8. Give a probable explanation for the reporting entities to procure more assets and lease fewer assets after the incorporation of AASB 16

The effect of the implementation of AASB 16 proves to lay an impact in the leasing market that led the companies to purchase more assets and lease fewer assets. This is due to the following reasons:

Balance sheets: The implementation of the AASB 16 requires to include the leases on the balance sheets excluding the short-term and low-valued leases that increases the financial liabilities and the lease assets. The companies thus find it tough to lease assets and this prime reason for them to procure for more assets (Companydirectors.com.au, 2019). 

Cash-flow statement: The implementation of AASB 16 included the terms for the disclosure of the principal payments in respect of the lease payments which is supposed to become a part of the financial activities. The companies find it beneficial to procure more assets over leasing assets due to the above-said reason.

Income Statement: The rental expenses are supposed to be substituted with a depreciation cost on the lease assets. The implementation of the AASB 16 also included financial costs in regard to the component of interest of the lease liabilities (Companydirectors.com.au, 2019). The companies found it to be advantageous in investing revenues for the purchase of the assets rather than leasing the assets.

9. To summarize the prime disclosures that the ASX listed company has conducted on the lease accounting that includes the effect of the change from AASB 16 to AASB 117 and the provision for transition

Accent Group Limited is a company that basically deals with the distribution and retail of lifestyle footwear and performance over several countries across the globe. The company also required to make similar adjustments during the transition from the AASB 17 to AASB 16. The AASB 16 leases are termed as effective from the periods on or after 1 Jan 2019. It is due to the fact that the leases will be effective from the 30 June 2020 in the financial statements of the company. As per the standard, it introduces a model that deals with the identification of the accounting treatments and lease arrangements for both the lessees and the lessors. The new terms are to be replaced by the current accounting requirements of the lease. The fresh accounting standard eliminates the distinction between the financial and the operating lessees (Accentgr.com.au, 2019). On the other hand, it has been that these are substituted by a model over where a corresponding liability and correct use of an asset are reckoned. 

As per the required accounting standards of the lease (AASB 16), the Group has taken measures to meet the requirements as per the standards. The group is said to have established a committee dedicated for this purpose. The group includes the members from the property, treasury and finance to look after the implementation of this standard as well as look after the financial implications due to its implementation. It has been found that the Group has progressed in several numbers of areas after the implementation of the standard. The benefits that the company faced included:

 

Management Accounting Assignment HelpCorporate Accounting Assignment HelpManagerial Accounting Assignment HelpFinancial Accounting Assignment HelpCorporate And Accounting Accounting Theory Assignment HelpAccounting Assignment HelpLaw Accounting Assignment HelpAccounting Tutorial Assignment HelpSydney Company Accounting Assignment Help

 

 

 

 DOWNLOAD FULL SAMPLE

Submit Works

Drop File To Upload Or
BROWSE
Assignment Help Australia

Our Top Experts


Karen Betty

Holding a PhD degree in Finance, Dr. John Adams is experienced in assisting students who are in dire need...

55 - Completed Orders


Daphne Lip

Canada, Toronto I have acquired my degree from Campion College at the University of Regina Occuption/Desi...

52 - Completed Orders


Mr Roberto Tuzii

Even since I was a student in Italy I had a passion for languages, in fact I love teaching Italian, and I...

102 - Completed Orders


Harsh Gupta

To work with an organization where I can optimally utilize my knowledge and skills for meeting challenges...

109 - Completed Orders


ARNAB BANERJEE

JOB OBJECTIVE Seeking entry level assignments in Marketing & Business Development with an organization...

202 - Completed Orders


KARAN BHANDARI

Current work profile Project manager- The Researchers Hub (2nd Jan 2016 to presently working) Researc...

20 - Completed Orders


Tan Kumar Ali

Sales Assistant, Mito Marina Assigned to the Stationery dept – assisted in merchandising, stock taking...

100 - Completed Orders


Wesenu Irko

Personal Profile Dedicated and highly experienced private chauffeur. High energy, hardworking, punctua...

200 - Completed Orders