Proposed Changes Of Leases And Their Recognition On The Balance Sheet

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The proposed changes regarding leases and their recognition on the balance sheet, has been released in an exposure draft ED 242 by Australian Accounting Standards Board, otherwise referred to as AASB. The purpose of these proposed changes aims to bring transparency and accountability to these reports prepared by Australian companies. Leasing “is a means of gaining access to assets, of obtaining finance, and of reducing an entity’s exposure to the risks of asset ownership.” (AASB Exposure Draft, 2013). This means provides investors with a clearer insight into the overall picture of a company’s assets and liabilities. Originally the standards set out by the AASB, were criticized as they failed in providing investors with a faithful…show more content…
These factors are insuring that companies are accountable and that the information they provide to their investors is accurate and transparent. Accountability is “ the obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner. It also includes the responsibility for money or other entrusted property.” (BusinessDictionary.com, 2015). A company is obligated to provide accurate information to their investors, as they are shareholders in the company and thus hold an interest. This information is provided to these investors by these companies preparing General Purpose Financial Reporting (GPFR). These reports contain information such as Profit and Loss Statement, and the Balance Sheet. This Balance sheet depicts the company’s assets and liabilities, which determine the liquidity of a company for that period in time. Transparency is needed when it comes to the interaction between investors and these companies. The information contained in these GPFR must be in a form that investors can simply understand. The information presented must disclose all relevant details regarding the companies financial position. Transparency is “ minimum degree of disclosure to which agreements, dealings, practices, and transactions are open to all for verification.” (BusinessDictionary.com, 2015). In the old standards
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