A Report On The And Executive Of Xyz Ltd Essay
Directed to the CFO and CEO of XYZ Ltd
Prepared by David Ika
22nd May 2016
Introduction Objectives Definitions Body Differences between old and new leasing standard relevant to XYZ Ltd Recognition Measurement Disclosure Presentation Key effects of AASB16 on financial statements and ratios: Effects on income statement Effects on balance sheet Effects on statement of cash flows Effects on key financial ratios Theoretical benefits and problems of AASB16 versus AASB117 Concluding advice References
I have been asked to advise XYZ Ltd on the effects and changes of the upcoming AASB 16 standard. I will first discuss the main differences between the two standards and then focus on the effects that the new standard will have on XYZ’s financial statements and ratios. I will finish up by highlighting the theoretical benefits and problems of the new standard in comparison to the old standard, from the perspective of XYZ: a company holding a number of operating leases as a lessee. Definitions
Before proceeding, it first seems necessary to cover some relevant terminology on phrases to be used often. These are taken directly from Appendix A of the official ‘AASB 16 – Leases’ document, published February 2016 by the Australian Accounting Standard Board.
Lease: A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a…