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讨论拟议修改的会计处理租赁-Talking about the proposed changes to the Accounting for leases

1.0 Introduction

A lease is defined as a contractual agreement between a lesser and lessee that gives the lessee the right to use specific property, either owned by or in the possession of the lesser, for a specified period of time in return for stipulated, and generally periodic, cash payment (Vivien Beattie et al,2006).When referring to lease, we all know that there is a classification of leases. If a lease transfers substantially all the risks and rewards incidental to ownership, we call it a Finance lease. On the contrary, a lease is identified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. The two kinds of leases are treated in the different way in the financial statements of lessees. Lease payments under an operating lease shall be recognized as an expense on a straight-line basis over the lease term,unless another systematic basis is more representative, such asthe time value of the user’s capital which used for finance leases, and shouldthe Statement of Financial Positionshould include this part of expenses.(IAS 17 Leases, 1997).
However, the InternationalAccounting Standards Board (IASB) and the UK Finance Corporation Wright (KFCW) issued an Exposure draft on 24 August 2010, the draft claims that long-term leases (more than one year) would not differentiate finance lease and operating lease. All long-term leases should be treated in the same way. Undoubtedly, this is big news to lease industry. The project will bring in many changes.

 2.0 Discussion and Analysis

2.1 The advantages of the changes
At first, investors would have a complete picture of a company’s leasing activities because lessees recorded the assets and liabilities that arise from all lease contracts. However, in today’s accounting for leases, if a lease is classified as a finance lease, assets and liabilities are shown on the lessee’s balance sheet. However, for an operating lease, assets and liabilities are not recorded in lessees’ financial statements. Hence, investors have to estimate the effect on financial leverage and earnings. Of course, this estimate is subjectiveand not precise.Theinformation ofamounts, timing and uncertainty of cash flows arising from lease contracts wouldbe providedin the financial statements. This can help investorsbetter understand the companies’ leasing activities,and the estimation about the effect of operating leasesmay also be reduced.
Secondly, the proposals would result in the same accounting for most lease contracts by lessees. This would increase comparability of financial statements for investors and reduce the opportunity to structure transactions to achieve a desired accounting outcome.
Conversely,in today’s accounting for leases, economically similar transactions can be accounted for very differently because of the distinction between operating and finance leases. So comparingdifferent entities and the implications of different leasesis difficult for investors.(ExposureDraft Leases, 2010)Moreover, the current accounting standards of this area are rules-based, they are complex. Thus, this circumstance makes it possible to structure transactions to achieve desired accounting outcomes. (Vivien, Alan, Sarah, 2006).本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。