Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet

Michelle Joubert; Leanda Garvie; Gabrielle Parle

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Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet

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Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet

Michelle Joubert, Leanda Garvie and Gabrielle Parle

Journal of New Business Ideas and Trends, Vol.15(2), pp.1-11

2017

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Abstract

Banking, Finance and Investment

Commercial Services

AASB 16 Leases

Altman z score

return on total assets

debt to equity.

Purpose: This paper examines the potential impact that the new leasing standard will have on the key financial ratios of major companies in the telecommunications and aviation sectors where leasing plays a major role in the operations of the firms. Design/methodology/approach: Data was obtained from the publicly available annual financial reports of companies listed on the Australian Stock Exchange for the years 2016 and 2015. The research was concerned with calculating the key financial ratios that would be most changed by the inclusion of leased items on the Balance Sheet and comparing the extent of the changes. Specifically, the Return on Assets and Debt to Equity ratios are the most likely to be affected by the inclusion of Operating Leases and are therefore examined. The other area examined is the potential impact on the Altman Z score for the companies since this could influence the perception of liquidity. Findings: The results indicate that the inclusion of the additional leased items, previously classified as operating leases, does impact on the return on total assets and debt to equity ratios. In terms of the amount by which the total assets and total liabilities increase was found to material under the 10% threshold of accounting standard AASB 1031 Materiality. The impact upon the Altman Z scores did not result in any company transitioning to a different z score zone.

Details

Title: Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet
Authors: Michelle Joubert (Author) - University of the Sunshine Coast - Faculty of Science, Health, Education and Engineering
Leanda Garvie (Author) - University of the Sunshine Coast - Faculty of Science, Health, Education and Engineering
Gabrielle Parle (Author) - University of the Sunshine Coast - Faculty of Science, Health, Education and Engineering
Publication details: Journal of New Business Ideas and Trends, Vol.15(2), pp.1-11
Publisher: Australian Business Education Research Association
Date published: 2017
ISSN: 1446-8719
Organisation Unit: School of Business and Creative Industries; University of the Sunshine Coast, Queensland; USC Business School - Legacy; Forest Research Institute
Language: English
Record Identifier: 99450420402621
Output Type: Journal article

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