Operating Lease And Finance Lease

1307 Words Nov 6th, 2015 6 Pages
Introduction

What is accounting? Accounting is to saving, arranging, plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses and also records the financial transactions. Accounting also focus on preparing a transparent and general purpose form of financial statement to people outside of the company (What is accounting?), so that the public could easily understand the financial status of a company, but as a new specific accounting standard released the regulations about leasing, things are getting unclear.

In this paper I am going to discuss about what are the definition of both operating lease and finance lease, and mainly focus on operating lease due to the majority of companies using this standard. Then find out what makes companies tend to choose the certain leasing standard and also to discover the relationship between them. After that I will discuss how this could affect the investors’ decision, also to discover the benefit that the lessee and lessor might have from the leasing standard. After find out the problem and why it occurred, I will discuss how this issue could be solved and try to find out the solution through the International Accounting Standards Board (IASB).

What is the problem?

In 2005, IAS 17 was adopted in Australia by Australian Accounting Standard Board (AASB) as AASB 117 (AASB, 2004). There are two types of leases in AASB 117, finance lease and operating lease. Based on the Generally…
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