What are operating and what are finance leases

Reference no: EM131052545 , Length: word count:2000

Analysis of a contemporary issue

Assignment details:

Read the article entitled 'Shining the Light on Leases' on the IASB website (https://www.ifrs.org/Features/Pages/Shining-the-Light-on-Leases.aspx) and answer the questions below:

1) Under the existing standard IAS 17 (AASB 117) Leases - what are operating and what are finance leases? Explain the concepts briefly with reference to lessees only, rather than providing all the technical details.

2) What are the main differences between IAS 17 (AASB 117) and the new IFRS 16 (AASB 16) from the lessee perspective?

3) What is meant by ‘off balance sheet liabilities' in the article?

4) Why will the changes to lease accounting ‘not be popular with everyone'? In particular, why may the changes lead to ‘defaults on debt covenants'?

5) An alternative viewpoint to those taken into account by the IASB is that no separate standard is required on leases at all. What would the arguments be for this? Would you prefer no leasing standard, the existing standard (IAS 17) or the new standard (IFRS 16)? Please explain your position.

Reference no: EM131052545

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