International Accounting Standards - Essay Example

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International Accounting Standards

Many instances were reported by the relevant stakeholders, where the management had concealed liabilities by classifying a lease as an operating lease where it should have been classified as a Finance lease based on the economic reality. To cater these issues IASB drafted and enforced a proper standard “Accounting for leases”. As the objective indicates, the standard has been divided into two main sections, Operating Lease and Finance Lease. This particular classification has been based on the transfer of risk and rewards of the underlying asset to lessee or lessor. Further aspects distinguishing the leases are discussed below in detail. The scope of the standard proposes it's non – applicability on the following areas: “Leases to explore minerals, oils, natural gas and similar non-generative resources; Licensing agreements for items as motion picture films, video recordings, manuscripts, patents and copyrights (because they are under scope of IAS 38). IAS 17 shall not be applied as the basis for measurement for leases discussed under IAS 40 (Investment property) and IAS 41 (biological assets). The standard will not apply to contract of services that do not transfer the right to use assets from one contracting party to the other”. (Financedoctors, n.d.) The standard has been further segregated into two aspects. ...Show more

Summary

International Accounting Standard – 17 Accounting for Leases Name IAS 17 - Leases The objective of IAS 17 is to suggest, for lessees and lessors, an appropriate accounting treatment and disclosures to apply when accounting for leases…
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