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The current debate and developments in accounting for leases for lessees - Essay Example
Finance & Accounting
Pages 10 (2510 words)
THE CURRENT DEBATE AND DEVELOPMENTS IN ACCOUNTING FOR LEASES FOR LESSEES EXECUTIVE SUMMARY Leases are an important source of financing for business. Lease facilitates lessee right to use and gain the benefits of fixed asset property to conduct business (Mirza and Holt, 2011)…
This report provides the discussion regarding the reasons behind aforesaid changes in standards. Maintaining focus from the lessee point of view, this report puts together the new proposal for lessees regarding the ‘right to use’ model. Moreover, it will discuss the impact of proposed changes on the companies worldwide using international standards in the preparation of their financial statements. INTRODUCTION Lease is essentially a form of rental agreement where the owner (lessor) receives rentals from lessee. Corresponding to mentioned rentals, lessee gains right to use the assets (EZ Technical, 2009). Lease is a major source of finance for business and to give the correct picture of business, it must provide the source of this important information in the financial statement (Roberts, Weetman, Gordon, 2008). Currently, lease under operating category does not provide this information (Melville, 2011). Therefore, to ensure the financial statements represent lease transactions in harmony with commercial essence and not in according to the legal form only, International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) proposed new approach to lease accounting (Cotter, 2012). ...
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