ACCG 224
ACCG 224 REPORT
COMPANY: DAVID JONES LTD
STUDENT NAME: SUDHARSAN SRIKANT
STUDENT NO: 42718961
TABLE OF CONTENTS
EXECUTIVE SUMMARY…………………………………. Page 3
INTRODUCTION:
CLASSIFICATION OF LEASES…………………………….................. Page 4
TREATMENT OF LEASES………………………………………………….. Page 5
NEW TREATMENT FOR LEASES:
CLASSIFICATION OF LEASES……………………………………………. Page 6
MEASUREMENT……………………………………………………………… Page 6
LEASE LIABILITY………………………………………………………………. Page 6
SUBSEQUENT MEASUREMENT AND REASSESSMENT………. Page 7
PRESENTATION………………………………………………………………. Page 7
IMPACT OF THE NEW ACCOUNTING SYSTEM... Page 8
CONCLUSION………………………………………………. Page 9
REFERENCES……………………………………………… Page 10
EXECUTIVE SUMMARY
Leases are an important way of financing for many big organizations but under the current accounting standards a majority of the leases are not reported under the lessee’s balance sheet and sometime the values are quite large and hence the existing standards have been criticized for failing to meet the needs of users of financial statements because they do not always provide a faithful representation of leasing transactions. Currently David Jones Ltd leases most of its offices and stores as it makes a lot of sense financially to do so, the firm has been making great profits over the last couple of years and is expected to grow at the same pace with new stores coming up in Perth and Melbourne. However, under the new accounting standards proposed by the IASB, an entity shall classify a lease as either a Type A lease or a Type B lease. An entity shall not reassess the classification after the commencement date. Hence leases now are classified differently from the “Operating and Finance leases” that existed under the previous accounting system and also treated in a different manner. Type A and Type B leases under
COMPANY: DAVID JONES LTD
STUDENT NAME: SUDHARSAN SRIKANT
STUDENT NO: 42718961
TABLE OF CONTENTS
EXECUTIVE SUMMARY…………………………………. Page 3
INTRODUCTION:
CLASSIFICATION OF LEASES…………………………….................. Page 4
TREATMENT OF LEASES………………………………………………….. Page 5
NEW TREATMENT FOR LEASES:
CLASSIFICATION OF LEASES……………………………………………. Page 6
MEASUREMENT……………………………………………………………… Page 6
LEASE LIABILITY………………………………………………………………. Page 6
SUBSEQUENT MEASUREMENT AND REASSESSMENT………. Page 7
PRESENTATION………………………………………………………………. Page 7
IMPACT OF THE NEW ACCOUNTING SYSTEM... Page 8
CONCLUSION………………………………………………. Page 9
REFERENCES……………………………………………… Page 10
EXECUTIVE SUMMARY
Leases are an important way of financing for many big organizations but under the current accounting standards a majority of the leases are not reported under the lessee’s balance sheet and sometime the values are quite large and hence the existing standards have been criticized for failing to meet the needs of users of financial statements because they do not always provide a faithful representation of leasing transactions. Currently David Jones Ltd leases most of its offices and stores as it makes a lot of sense financially to do so, the firm has been making great profits over the last couple of years and is expected to grow at the same pace with new stores coming up in Perth and Melbourne. However, under the new accounting standards proposed by the IASB, an entity shall classify a lease as either a Type A lease or a Type B lease. An entity shall not reassess the classification after the commencement date. Hence leases now are classified differently from the “Operating and Finance leases” that existed under the previous accounting system and also treated in a different manner. Type A and Type B leases under
References: Dhaliwal, Dan, 2011. The Impact of Operating Leases on Firm Financial and Operating Risk.. Journal of Accounting, Auditing & Finance., [Online]. Volume 26 Issue 2, 151-197.. Available at: http://web.ebscohost.com.simsrad.net.ocs.mq.edu.au/ehost/detail?vid=3&sid=9317bb11-bcea-4e15-99f8-3930c890a726%40sessionmgr111&hid=103&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=67004285 [Accessed 23 September 2013]. http://www.pwc.com.au/assurance/ifrs/assets/proposed-accounting-standards/leases/Leases-Future-Leasing-Jun10.pdf. [Accessed 23 September 2013]. Mala, Rajni, 2013. Intermediate financial Accounting. 1st ed. Queensland: Wiley.