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Leases. Principles for Financial Reporting, ASB. - Essay Example
Leases. Principles for Financial Reporting, ASB.
Off-balance sheet arrangement have long been the main concern of all accounting regulators and the economic consequences related to these items have prompted these regulators around the globe…
Operating leases are known to be one of the off-balance sheet obligations; therefore, the placement of lease accounting continues to be one of the priorities for Financial Accounting Standard Board (FASB) and the International Accounting standards Board (IASB). During March 2009, these boards issued paper referred to as Leases: “preliminary view” which clearly outlined the proposal for new global lease accounting standards. The proposed standards would need the replacement of all operating leases with the capital leasing thus, triggering a shift of billions of dollars to the balance sheet across North America which was estimated that 70% of the total lease value would be capitalized if it involves commercial real estate. Then the end result of these change of the magnitude will be vast shift rippling through all financial reporting, the processes and merits across all us and global industries. Introduction: In the current UK accounting standard, it is important to understand that for any accounting purpose leases are generally classified as being either financial or operating standards: First, the word lease simply means an agreement between two parties involving a hiring of asset. The lesser is a legal owner who lets out the asset to the lessee and then at the end of the lease, the asset is returned to the lesser; ...