The Aspects Of Ias 17

1460 Words Feb 7th, 2016 6 Pages
'IAS 17 Leases prescribes the accounting policies and discloses applicable to leases, both for lessees and lessors ' (Deloitte, 2015:1). All leases are either classified as a finance lease or an operating lease, with the main difference being the information that is required to be recorded on the balance sheet. As some information is then off-balance-sheet, this can cause conflict with the objective of financial statements. As the objectives are set to provide financial information about the entity to existing and potential investors, lenders and creditors, without this information it is hard for them to see the true value of the company (ACCA, 2011). This essay will discuss the aspects of IAS 17 in detail while approaching conflicts that exist between the accounting concept and the IASB 's Conceptual Framework while explaining to what extent the statement can be agreed with.

A finance lease is where all the risks and rewards of ownership are transferred to the lessee, this means the lessee recognises the assets and liabilities of the item and the lessor gains receivables. On the other hand an operating lease is recognised as an expense by the lessee, with the lessor still recognising the asset as their own. This means the lessee records the expense in the income statement usually on a straight-line basis instead of the balance sheet (Deloitte, 2015:1).
Milano (2012) explains that a lot of chief financing officers (CFOs) do not agree with operating leases due to…

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