4 One of the areas where the company has failed to implement GAAP mentioned in the accounting assignment is in case of leases where the management has still not applied the revised accounting standard on leases – AASB 16. This would be having a substantial impact on the result as well as the position of the company. In case the new accounting standard would have been applied, the operating lease commitments of $143.2 Mn which has been accounted as an expense in the balance sheet would have been reversed and the would have decreased the profit of the company. As per the new standard/ GAAP, the company is required to show the right to use asset amounting to $98 Mn and the liability of $133 Mn with the difference being recognised as retained earnings (Jones, 2015). As per the earlier standard, the onerous lease contracts were required to be recognised in the books which amounted to $3.9 Mn. The same will now be reversed in the books against the right to use asset. Furthermore, the lease incentives and payables which were recognised as operating leases as per the old standard will all now are recognised against the right to use asset. All in all, the total adjustment towards retained earnings would have been approximately $ 5m as per the revised standard. From the perspective of the lessor accounting as well, the company explored in the context of accounting assignment would have to classify 2 out of 4 leases as the finance lease as the present value of lease payments are towards the major part of the economic life of the given asset held by the entity. As a result of this, the company would have to reverse $7 Mn as the right to use asset and recognise $ 10 Mn as the net investment in sub-lease. The net change of $ 3 Mn would be recognised as other income in the financial statement. This would have a substantial impact on the valuation of the company as the balance sheet would be netted off and grossing up of the asset and liabilities would be avoided. The investors will get a true and fair view of the valuation of the company and it will help them to make informed decision making. With the old standard on leases, the companies had the flexibility of changing the categorization of the leases amongst the operating and the finance leases but with the new standard, this would be avoided, and the true classification of leases would be ensured based on their nature (Deegan, 2014). There are several other changes that have been introduced by IASB w.r.t. Conceptual Framework as mentioned herein accounting assignment. The amendments include changes to IFRS 2, IFRS 14, IFRS 3, IAS 8, IAS 8, IAS 34, IAS 38, IFRIC 22, IFRIC 12, IFRIC 20 and SIC 18. Some of these changes will not have an impact on the definition of the standards but will bring about a change in the presentation of the financial statements. References Alexander, F., 2016. The Changing Face of Accountability. Accounting assignment The Journal of Higher Education, 71(4), pp. 411-431. Deegan, C., 2014. Financial Accounting Theory. Australia: McGraw-Hill Education (Australia) Pty Ltd. Heminway, J., 2017. Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents. SSRN, pp. 1-35. Henderson, S. et al., 2017. Issues in financial accounting. 16th ed. Australia: Pearson. ICAEW, 2011. Measurement of Financial Reporting. Financial Reporting Faculty, pp. 6-22. Jones, S., 2015. The Routledge companion to financial accounting theory. 1st ed. London: Taylor and Francis. Loftus, J., 2018. Financial Reporting. 2nd ed. Australia: Milton, QLD John Wiley and Sons Australia Ltd.. Marques, R. P. F., 2018. Continuous Assurance and the Use of Technology for Business Compliance. Encyclopedia of Information Science and Technology, pp. 820-830. Sithole, S., Chandler, P., Abeysekera, I. & Paas, F., 2017. Benefits of guided self-management of attention on learning accounting. Accounting assignment Journal of Educational Psychology, 109(2), p. 220.
Subject Name: Accounting
Level: Undergraduate
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