Accounting Theory and Applications assignment 代写
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Accounting Theory and Applications assignment 代写
Individual Assignment
Unit: TACC406 Accounting Theory and Applications.
Due Date: 5pm Friday, 20 July 2018
Total Marks: 20 marks
Number of Questions: 1 Part
Instructions: All questions should be attempted.
The marks of each question would be awarded based on your understanding of
the questions, concepts and procedures; hence you should demonstrate your
answers step by step.
PLEASE READ THIS DOCUMENT CAREFULLY BEFORE YOU BEGIN, SO YOU DO NOT LOSE
MARKS.
INSTRUCTIONS TO FOLLOW:
• Any list of the references actually cited must be included in your assignment paper.
• Font type should be Times New Roman (size 12), paragraph spacing should be equal to 1.5.
Marks:
The assignment is worth 20% of the total mark for the unit. The marks awarded will depend on the quality of
the reasoning exhibited and the ability to express the argument in a concise manner.
Due date:
The assignment must be submitted on or before 5pm Friday, 20 July 2018. Late assignments will be accepted
up to 72 hours after the submission deadline. There will be a deduction of 20% of the total available marks
made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for
example, 25 hours late means a 40% penalty).
HOW TO SUBMIT YOUR ASSIGNMENT
No hard copy is required
You MUST submit an electronic copy through TURNITIN on Moodle for checking plagiarism. Failure to
submit it may result in a zero mark for the entire assessment.
Part A (20 marks)
Leasing
In an address entitled ‘Introductory comments to the European Parliament’ (made in Brussels, Belgium) on
11 January 2016, the Chairperson of the IASB, Hans Hoogervorst, made the following comments in relation
to the new accounting standard on accounting for leases (as reported 11 January 2016 on the IASB website
at www.ifrs.org):
I would like to make some comments about our upcoming Leases Standard, which we will publish the
day after tomorrow. Currently, listed companies around the world have around 3 trillion euros’ worth
of leases, especially in sectors such as the airline industry, retail and shipping. Under current
accounting requirements, over 85 per cent of these leases are labelled as operating leases and are
not recorded on the balance sheet. Clearly, the accounting today does not reflect economic reality.
Despite operating leases being off balance sheet, there can be no doubt that they create real
liabilities. During the financial crisis, some major retail chains went bankrupt because they were
unable to adjust quickly to the new economic reality. They had significant long-term operating lease
commitments on their stores, and yet had deceptively lean balance sheets. In fact, their off balance
sheet lease liabilities were up to 66 times greater than the debt reported on their balance sheet.
Moreover, the current accounting for leases leads to a lack of comparability. An airline that leases
most of its aircraft fleet looks very different from its competitor that bought most of its fleet, even
when in reality their financing obligations may be very similar. There is no level playing field between
these companies. These problems will be resolved in the upcoming Leases Standard. All leases will
be recognised as assets and liabilities by lessees. The accounting will better reflect the underlying
economics. This change is expected to affect roughly half of all listed companies and will not be
popular with everyone. Accounting changes are often controversial and can be met with warnings of
adverse economic effects and costs of system changes. The IASB has looked at all these possible risks
very carefully and we will publish a detailed effect analysis on the Standard. Our conclusion is that
the risks and costs of the new Leases Standard are manageable. First of all, IFRS 16 will not put the
leasing industry out of business. Leases will remain attractive as a flexible source of finance. It will
remain appealing to companies to lease assets so that they do not bear the risks of owning them.
While the cosmetic accounting benefits of leasing will disappear, the real business benefits of leasing
will not change as a result of the new Standard. We do not deny there will be costs involved in
updating systems to implement the new Leases Standard, but we have done our best to keep these
costs to a minimum. For example, we are not requiring companies to recognise assets and liabilities
for short term and small ticket leases. This should be especially beneficial for smaller companies. In
sum, we expect the benefits of the new Leases Standard to greatly outweigh its costs. The new visibility
of all leases will lead to better informed investment decisions by investors, and to more balanced
lease-versus-buy decisions by management. IFRS 16 will lead to improved capital allocation, which
should be beneficial for economic growth.
Accounting Theory and Applications assignment 代写
REQUIRED
1. Explain why the Chairperson of the IASB believes that the former accounting standard for leases did
‘not reflect economic reality’. (4 marks)
2. What is the reason why, under the former accounting standard, reporting entities’ ‘off balance sheet
lease liabilities were up to 66 times greater than the debt reported on their balance sheet’? (4 marks)
3. Why does the Chairperson of the IASB argue that under the former accounting standard for leases
there was ‘no level playing field’ between some airline companies? (4 marks)
4. Why do you think the Chairperson of the IASB said that the new accounting standard for leases ‘will
not be popular with everyone’? What would cause this unpopularity? (4 marks)
5. What are some of the possible reasons why the Chairperson of the IASB would say: ‘The new visibility
of all leases will lead to better informed investment decisions by investors, and to more balanced lease-
versus-buy decisions by management’? ( 4 marks)
END OF THE ASSIGNMENT.
Accounting Theory and Applications assignment 代写
