Single Lessee Accounting Model †Free Samples to Students

Question: Discuss about the Single Lessee Accounting Model. Answer: Introduction IFRS 16 is an International Financial Reporting Standard, developed by IASB (International Accounting Standard Board). This standard provide the guidelines for the lease accounting. The main motive of the standard is to report that data which shows the accurate information about the lease transactions ("IFRS", 2017). It introduces a single lessee accounting model and requires that all the leases should be reported on the balance sheet and the lessee has to recognize all the assets and liabilities for almost all leases with a period of more than 12 months. Once applicable, it will replace IAS 17 ("IFRS 16 Leases", 2017). Great Eastern Holdings Ltd. was founded in 1908, is a life insurance group in Singapore and Malaysia. It is the oldest insurance company in Asia listed on Singapore Exchange. It provides services like banking, insurance and asset management. The mission of the company is to provide financial security to its clients ("Great Eastern", 2017). This report is about the requirements of the new lease standard for the lessee and lessor. It also explains the effects of IFRS 16 on the Great Eastern Ltd. IFRS 16 and its Requirements The new standard for lease was published by IASB in January 2016 and will come in effect from January 1, 2019. It defines the principles for the measurement and disclosure of the leases. The companies who have applied for IFRS 15 Revenue from Contracts with Customers can choose to apply for IFRS 16 before its effective date. The main objective of IASB to introduce this new standard, is to improve the financial reporting of lease. Under IFRS 16, a leases is defined as a contract that provides right to the customer (lessee) to use an asset for a particular period of time in exchange of some consideration. The requirements of the definition of lease has also changed from those in IAS 17. The new standard brings a significant change in the approach and will effect several industries. The enterprises which will be mainly affected by IFRS 16 are retail and consumer, telecommunications, banking and financial institutions, metals and mining, oil and gas and insurance entities. Once the new s tandard became effective, it will replace the old standard of lease that is IAS 17. It will eliminate the classification of leases as financial lease and operating lease and all of them are treated in a similar way ("IFRS 16 Leases | Deloitte UK", 2017). As the new standard provide a single lessee accounting model, the lessee is required to: Recognize assets and liabilities of most of the leases with a time period of more than 12 months. The exemption is provided for assets having low value. Separation of the depreciation charged on lease assets from the interest on lease liabilities. Previously, according to the IAS 17, the focus was mainly on identifying the finance lease that is required to be reported in the balance sheet. The lease which is economically similar to the purchasing of a leased asset is considered to be finance lease. All the other leases were termed as operating leases and were not required to be shown on balance sheet. They were known as off balance sheet leases. Now, as per IFRS 16, lessees are require to report all the leases on their balance sheet, irrespective of the industry in which the entity works. The whole accounting treatment of leases done by lessees will change fundamentally. It will completely remove the current dual accounting model which distinguishes between the on balance sheet leases and off balance sheet leases. Another requirement for the lessee is to separate lease components and the non-lease components of their contracts. After identifying the components, they are require to provide consideration for each component. Lessees who do not make an accounting policy election are required to allocate the consideration to the separated components on the basis of standalone selling price ("IFRS 16: The leases standard is changing", 2016). The requirements for the lessor, stated under IFRS 16 are same as to IAS 17. The classification of leases is done in the similar way that is operating and finance leases by the lessor in order to report them differently. The requirements of lessor accounting are not fundamentally changed like those of lessee accounting. Changes in accounting environment Implementation of IFRS 16 has brought number of changes in the accounting environment of leases. It brings dramatic changes in the balance sheet of lessees, whereas lessor accounting is slightly changed. According to the new standard, lessee are required to do the initial recognition of the lease liability for which the lease payment has to be made. They are also required to recognize the right-of-use asset to use the underlying asset for the lease. After recognition, the lease liability and right-of-use asset are being measured. A lessee measures the liability of lease at the present value of future lease payments. The payments include, fixed, non-cancellable payments, variable lease payments, residual value guarantees, the price of a purchase option which is to be exercised by lessee and penalties for termination options. The measurement of right-of-use asset is based on the amount of lease liability, with the adjustments for the prepayments, lease incentives received and initial direct cost incurred ("IFRS 16 LEASES FACT SHEET", 2017). While doing the subsequent measurement, the lessee accounted the lease liability like a financial liability through the use of effective interest method. The accounting for right-of-use asset is done similarly to the accounting of a purchased asset and it is depreciated as per the requirements of depreciation of IAS 16. After doing the recognition and measurement, the lease liability and asset is presented in the financial statement of lessee. The right-of-use assets are either shown separately in the balance sheet or are disclosed in the notes and the similar presentation of the lease liabilities is done. Expenses related to depreciation and interest are shown separately in the income statement. Payments of lease liabilities are presented in financing activities in cash flow statement and interest payments are presented on the basis of accounting policy election in compliance with IAS 7. The accounting of lessor is not changed under the new standard. It remains the same from current accounting in IAS 17. Lessors classify all the leases as per the classification mentioned in IAS 17 and categorize the leases in operating and finance leases. In operating lease, the lessor continues to recognize underlying asset and for finance lease, lessor derecognize the underlying asset and recognize a finance lease receivable according todays requirements (2016). At time of subsequent measurements: Operating lease: lessor measure the income from lease on straight-line basis or on another basis which shows a reduced benefit derived from the use of underlying asset. Finance lease: for the accumulation of the net investment in lease, lessor measures the interest income and reduce that investment for the received payments. Effects on financial statements Implementation of IFRS 16 will majorly affect the balance sheet and income statement of the lessee. As per the requirements of the new standard, lessee have to show all the liabilities and the supported assets related to operating leases on-the balance sheet except from those leases which are for the period of less than 12 months and the lease assets are of low value. As a result, there will be a significant increase in the assets and liabilities of the lessee company which will eventually reduce its equity. On the top of that, the companys income statement will show an interest expense and a depreciation charge on the lease assets in place of annual rental cost. All this will lead to an increase in the earnings before income, tax, depreciation and amortisation (EBITDA) and earnings before income and tax (EBIT) of the company as compare to the previous standard IAS 17 accounting. The interest expense calculated will be higher at the beginning of the lease contract and will decline la ter on as and when payments are made and the depreciation is charged on straight line basis. This reflects a profile of front loaded cost, which means that there should be little or no impact on the profit during the life of an individual lease. Like IAS 17, the profit will remain stable under IFRS 16 ("Ex ante Impact Assessment of IFRS 16", 2017). The new standard will also affect the cash flow statement of the company. As such the cash outflow will have no impact, but the structure of cash flow statement changes. The net cash flow generated from financing activities decreases and with the same amount the cash flow from operating activities increases. The below table shows the changes in EBITDA, EBIT and in the profit margin of the different industries sector, after the implementation of IFRS 16. Hypothetical values are been taken to show the comparison between the reporting under IAS 17 and IFRS 16. As it can be seen that the sectors which are highly affected by the new standard a re Airlines, Retail and travel and leisure sectors. While other sectors like healthcare, information technology are slightly affected (Lavi, 2016). The key financial ratios and performance metrics will also have impact of IFRS 16. Ratios like gearing, asset turnover, interest coverage, EPS, ROE, ROCE, current ratio, operating profit and operating cash flows are affected. Performance metrics like EBIT, EBITDA, will increase without any changes in the underlying cash flows. Overall, the financial statements of the entities working in different industries will be majorly affected by the adoption of the new lease standard IFRS 16. Effects on Great Eastern Holdings Ltd. The new lease standard IFRS 16 has affected many companies working in different industry sectors. The majorly affected are airline industry, retail sector, telecommunication, banking and other financial institutes, oil and gas. While other companies like insurance and health care have a minor impact on their financial statements. As it is already discussed that the accounting for operating lease has been changed under IFRS 16 for the lessee, so the companies who takes assets on the basis of operating lease has to make major changes in its final accounts. As far as Great Eastern Holdings ltd. Is concerned, it is an insurance company operating in Singapore and Malaysia. The company provides services like banking and insurance to its customers. For preparing its financial statements, the company follow the guidelines and the provisions of Singapore Financial Reporting System. The accounting of leases is done under FRS 116, whose provisions are same as IAS 17. The policy adopted by the company regarding leases is, as a lessor, the accounting of rental income derived from operating leases is done on straight line basis and as a lessee, the lease payments are been reported as an expense in the income statement on straight line basis. If the company adopts IFRS 16, it will have to prepare its final accounts according to the provisions under the new lease standard. Being a lessor, the company may follow the concepts of IAS 17 for doing the lease accounting. But when working as a lessee, it has to make certain changes in its financial reporti ng. As it can be seen above that, when the company entered into operating lease agreement for commercial property, it has a total of $73.1 million lease payment under non-cancellable operating leases in the year 2016. When it entered in the lease agreement for computer equipment, it has $21.5 million payments payable under non- cancellable operating leases. Both the values are not reported in the balance sheet of the company as liabilities and are shown in notes to accounts ("Annual Reports", 2016). As per the requirements of IFRS 16, the lessee has to show all the leases and their supported assets in the balance sheet as financial lease. This means the operating leases which is shown in balance sheet will be changed and the liability of $73.1 million and $21.5 million has to be recognized on the balance sheet. All the off balance sheet items will be eliminated and the operating expenses will be replaced with finance cost in profit and loss account. Adoption of new lease standard can als o affect capital adequacy. Covenants, credit ratings and borrowing costs. Conclusion From the above report, it can be concluded that the IFRS 16 has laid the new requirements which will change the procedure of accounting for leases, especially for operating leases. It will remove the classification of operating and finance lease and would provide a single accounting model. The report explains that the lessee companies will be majorly affected by the implementation of IFRS 16 as they have to change their policies regarding the accounting of leases. Overall, the new lease standard will replace the IAS 17 and will provide accurate information about the leases. References IFRS 16 Leases. (2017).Iasplus.com. Retrieved 13 November 2017, from https://www.iasplus.com/en/standards/ifrs/ifrs-16 (2016).KPMG. Retrieved 14 November 2017, from https://www.in.kpmg.com/ifrs/files/first-impressions-leases-IFRS16.pdf Annual Reports. (2016).Great Eastern, Singapore. Retrieved 15 November 2017, from https://www.greateasternlife.com/sg/en/about-us/investor-relations/annual-reports.html Ex ante Impact Assessment of IFRS 16. (2017).Efrag.org. Retrieved 15 November 2017, from https://www.efrag.org/Assets/Download?Asseturl=%2Fsites%2Fwebpublishing%2fsiteassets%2FIFRS%252016%2520-%2520Europe%2520Economics%2520-%2520Ex%2520ante%2520Impact%2520Assessment%2520%2822%2520February%25202017%29.pdfaspxautodetectcookiesupport=1 Great Eastern. (2017).Great Eastern, Singapore. Retrieved 13 November 2017, from https://www.greateasternlife.com/sg/en/about-us.html IFRS 16 Leases | Deloitte UK. (2017).Deloitte United Kingdom. Retrieved 15 November 2017, from https://www2.deloitte.com/uk/en/pages/audit/articles/ifrs-16-leases.html IFRS 16 LEASES FACT SHEET. (2017).Cpaaustralia.com.au. Retrieved 14 November 2017, from https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/reporting/factsheet-ifrs16-leases IFRS 16 Leases Road map. (2016).Ey.com. Retrieved 15 November 2017, from https://www.ey.com/Publication/vwLUAssets/ey-leases-a-summary-of-ifrs-16/$FILE/ey-leases-a-summary-of-ifrs-16.pdf IFRS 16 Leases. (2016).Ifrs.org. Retrieved 15 November 2017, from https://www.ifrs.org/-/media/project/leases/ifrs/published-documents/ifrs16-effects-analysis.pdf IFRS 16: The leases standard is changing. (2016).Pwc.com. Retrieved 15 November 2017, from https://www.pwc.com/gx/en/services/audit-assurance/assets/ifrs-16-new-leases.pdf IFRS. (2017).Ifrs.org. Retrieved 15 November 2017, from https://www.ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/ Lavi, M. R. (2016).The impact of IFRS on industry. John Wiley Sons. Morales-Daz, J., Zamora-Ramrez, C. (2017). Effects of IFRS 16 on Key Financial Ratios: A New Methological Approach. Singer, R., Pfaff, A., Winiarski, H., Winiarski, M. (2017).Accounting for Leases under the New Standard, Part 1 - The CPA Journal.The CPA Journal. Retrieved 14 November 2017, from https://www.cpajournal.com/2017/08/23/accounting-leases-new-standard-part-1/

Compettive Analysis Costco Wholesale Company free essay sample

It has undergone expansion and is now represented in many countries around the world. Limited product offerings (usually only 10% of typical retail establishments) create a â€Å"treasure hunt† atmosphere for Costco customers. Costco members are very loyal, with renewal rates consistently between 85 and 90 percent. Weaknesses Its limited range of products in stores may not allow it much flexibility compared to competitors that are less specialized. Costco’s â€Å"discount† business plan is typically immune to economic downturn, however, an extended recession or the rising value of the dollar may pinch margins. Opportunities Expanding product offering in individual stores may provide greater prospects. Costco should also enter new domestic markets and international markets. Costco should also enter unexploited markets such as automobiles, entertainment, or furniture. Threats Costco Wholesale Co. is under the threat of worldwide competition from other stores, including up-and-coming or unknown retail concepts. Other threats include inflation and the general slow-down of the world economy. We will write a custom essay sample on Compettive Analysis Costco Wholesale Company or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Cross-implication matrix for Costco Wholesale Company |Strength |Weaknesses | |Opportunities |Enter unexploited markets |More focus on particular products | |Threats |Make use of economies of scale |Maintain high value products | Competitors Brand Competitors: Wal-Mart (Sams Club), BJ’s Wholesale Club Industry Competitors: Wal-Mart, Kroger, Supervalu Form competitors: Safeway, Target Generic competitors: Best Buy, local grocery/market, Chevron SWOT Analysis of Sam’s Club/Wal-Mart Stores, Inc. Sam’s Club is the membership warehouse outlet of Wal-Mart Stores, Inc. Wal-Mart is the worlds largest retailer, with nearly $400 billion in sales in the fiscal year ending Jan. 31, 2007. The company employs more than 2 million associates worldwide through more than 7,400 stores around the world. (www. finance. yahoo. com) Strengths Wal-Mart is the most powerful retail brand. It has a reputation for value, convenience and a wide range of products all in one store. Wal-Mart has grown substantially in recent years and has experienced global expansion (for example, its purchase of the United Kingdom based retailer ASDA). The company’s key to success is its use of information technology to support its international logistics system. For example, on-demand reports are available to track the performance of individual products world-wide, store-by-store at a glance. IT also supports Wal-Marts efficient procurement system. A focused strategy is in place for human resource management and development. People are key to Wal-Marts business and it invests time and money in training people, and retaining a developing them. Weaknesses Wal-Mart is the worlds largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Since Wal-Mart sells products across many sectors (such as clothing, food, or household items), it may not have the flexibility of some of its more focused competitors. Wal-Mart is a global brand; however, its presence is limited to a few countries world wide. Opportunities The most significant opportunity for Wal-Mart is to acquire, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. Global expansion has been limited in size and success. There are tremendous opportunities for future business in expanding consumer markets, such as China and India. Previous attempts by Wal-Mart were independent of existing retailers, so joint efforts may provide greater opportunity for success. In addition, new locations and store types offer Wal-Mart opportunities to exploit market development.

Homework Assignment For Residential Administrator Certificate Essays

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Understanding Usage of Generic Types in Delphi

Understanding Usage of Generic Types in Delphi Generics, a powerful addition to Delphi, were introduced in Delphi 2009 as a new language feature. Generics or generic types (also know as parametrized types), allow you to define classes that dont specifically define the type of certain data members. As an example, instead of using the TObjectList type to have a list of any object types, from Delphi 2009, the Generics. Collections unit defines a more strongly typed TObjectList. Heres a list of articles explaining generic types in Delphi with usage examples: What and Why and How on Generics in Delphi Generics with Delphi 2009 Win32 Generics are sometimes called generic parameters, a name which allows to introduce them somewhat better. Unlike a function parameter (argument), which has a value, a generic parameter is a type. And it parameterizes a class, an interface, a record, or, less frequently, a method ... With, as a bonus, anonymous routines and routine references Delphi Generics Tutorial Delphi tList, tStringList, tObjectlist or tCollection can be used to build specialized containers, but require typecasting. With Generics, casting is avoided and the compiler can spot type errors sooner. Using Generics in Delphi Once you’ve written a class using generic type parameters (generics), you can use that class with any type and the type you choose to use with any given use of that class replaces the generic types you used when you created the class. Generic Interfaces in Delphi Most of the examples I’ve seen of Generics in Delphi use classes containing a generic type. However, while working on a personal project, I decided I wanted an Interface containing a generic type. Simple Generics Type Example Heres how to define a simple generic class: typeTGenericContainerT classValue : T;end; With the following definition, heres how to use an integer and string generic container: vargenericInt : TGenericContainerinteger;genericStr : TGenericContainerstring;begingenericInt : TGenericContainerinteger.Create;genericInt.Value : 2009; //only integersgenericInt.Free;genericStr : TGenericContainerstring.Create;genericStr.Value : Delphi Generics; //only stringsgenericStr.Free;end; The above example only scratches the surface of using Generics in Delphi (does not explain anything though - but above articles have it all you want to know!). For me, generics were the reason to move from Delphi 7 / 2007 to Delphi 2009 (and newer).

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Leibniz's Conception of Substance Essay Example | Topics and Well Written Essays - 1250 words

Leibniz's Conception of Substance - Essay Example Such full understand is beyond the grasp of our finite minds, but is not beyond the grasp of God Any object in the universe is connected in some way or another. Every substance is like an entire world and like a mirror of God, or indeed of the whole world which it portrays, each one in its own fashion. Each substance reflects all the others. No substance can really cause any change in any other. What happens to be causal interaction among substances is really a "pre-established harmony" among them, reflecting the fact that God created each one with an eye to all the rest. The identity of indiscernibles - of all the harmoniously evolving substances in the universe, no two are alike in every respect. If any two were completely alike, they would be one substance rather than two. The mere possibility of these other worlds defeats the implication that whatever happens in our world is necessary. Leibniz's view rule out human freedom. God has decreed that "the will shall always seek the apparent good in certain particular respects. He, without at all necessitating our choice, determines it by that which appears most desirable". Whatever we do stems from our own will, and is done in pursuit of our vision of the good. Hence, anything we do is our own responsibility. God inclines our soul without necessitating them. Leibniz was dissatisfied with the way Descartes and Spin... To say, as Descartes did, that there are two independent substances - thought and extension - was to produce the impossible dilemma of trying to explain how those two substances interact as body and mind either in human beings or in God. Spinoza had tried to solve the dilemma by saying that there is only one substance with two knowable attributes, though and extension. But to reduce all reality to a single substance was to lose the distinction between the various elements in nature. To be sure, Spinoza spoke of the world as consisting of many modes in which the attributes of thought and expression appear. Still, Spinoza's monism was a pantheism in which God was everything and everything was [art of everything else. To Leibniz, this conception of substance was inadequate because it blurred the distinctions among God, humans, and nature each of which Leibniz wanted to keep separate. Paradoxically, Leibniz accepted Spinoza's single-substance theory and his mechanical model of the universe. However, he presented such a unique theory of this one substance that he was able to speak of the individuality of persons, the transcendence of God, and the reality of purpose and freedom in the universe. Extension versus Force. Leibniz challenged the fundamental assumption upon which both Descartes and Spinoza had built their theory of substance, namely, extension implies three-dimensional size and shape. Descartes assumed that extension refers to material substance that is extended in space and is not divisible into something more primary. Spinoza, too, considered extension as an irreducible material attribute of God and Nature. Leibniz disagreed. Observing that the bodies or things we see with our senses are divisible into

Human biology Assignment Example | Topics and Well Written Essays - 750 words

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