ACCG 224

2098 Words Sep 21st, 2013 9 Pages
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
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D) There is generally no option to continue the lease at a rent lower than market value.
E) There is no arrangement such that the risks and liabilities involved with the ownership of the asset would be transferred to the Lessee.

From the above classification we can see that all the points indicate that the leases undertaken by David Jones Ltd as a Lessee are Operating Leases or Finance leases and can be determined using the steps above. Being such a big company, David Jones Ltd has both Operating and Financial leases and they are taken mainly to run the firm’s stores and warehouses. Under the annual report for the half year ended 2013 it is clearly evident that the cost of leasing activities for David Jones Ltd has increased by 4.17mn. “Payments made under operating leases, where the lease agreement includes predetermined fixed rate increases, are recognised in the Statement of Comprehensive Income on a straight-line basis over the term of the lease. Other operating lease payments are expensed as incurred. Lease incentives received are recognised in the Statement of Comprehensive Income as an integral part of the total lease expense and spread over the lease term.”

Treatment of Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement
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