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.