IFRS Lease Draft: Impact on Financial Statements

• Main Authors: Wan-Ting Kuo, 郭婉婷
• Other Authors: 蔡彥卿
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/81741751622583637268

碩士 === 國立臺灣大學 === 會計學研究所 === 100 === Operating lease has been used as a method of off-balance sheet financing to improve companies’ performance and debt ratio. The existing lease accounting model requires lessees to classify their leases as either finance leases or operating leases. However, this model has been criticized for failing to provide financial statements faithfully and lead to a lack of comparability. In order to modify misunderstandings resulting from the existing accounting model and prevent users of financial statements from making inferior decisions, the IASB and the FASB cooperate to develop a draft standard on leases which will replace the existing standards. Once this draft comes into effect, both lessees and lessors will be affected. Therefore, to address the impact of lease draft on lessees’ financial statements, this study examined information of domestic public companies in shipping, electronic distribution and merchandise industries from 2002 to 2011. As for impact on lessors, we choose Chailease Financial Co., Ltd as representative and divide our discussion into three parts: (1) Balance Sheet, (2) Income Statement and (3) Key Financial Indices. The lease draft proposes that lessees and lessors apply a right-of-use model for all lease transactions, which means a lessee should recognize an asset representing its right to use the underlying asset during the lease term and a liability to make lease payments, no matter its lease transactions were originally classified as operating leases or finance leases. Under this model, a lessor whose lease transactions were classified as operating lease ought to recognize an asset representing its right to receive lease payments and a lease liability representing its obligation to permit the lessee to use the underlying asset during the lease term. First of all, we found the present value of unrecorded liabilities for operating lease were about 24.32%~28.92% of lessees’ reported total debts and the unrecorded right-of-use assets were about 12.07%~5.53% of their reported total assets. On the other hand, lessor’s unrecorded lease receivable and lease obligation which meet the definition of asset and liability were about 2.31% and 2.52% of its original reported total asset and total liability respectively. Secondly, we assumed that remaining lease life is two-third of total lease life. In early period, the sum of interest expense and amortization expense of right-of -use asset lessees recognized when applying the lease draft would be greater than rent expense. As a result, we expect lessees’ net income will decrease after the draft takes effect. Our results show that although some companies’ net income decreases as we expect, there are still some companies generate higher net income after applying the exposure draft. In average, lessees’ net income decreases by 6,547 thousand to 43,815 thousand. On the other hand, after lessors apply the lease draft, their net income will go up because the amount of interest revenue and lease revenue in early lease period is greater than rent revenue. Our results show that Chailease Financial Co.’s net income increases by 72,416 thousand in average. Finally, we discussed the change of financial indices and found that lessees’ total asset turnover declined 9.93%~11.78% and lessor’s total asset turnover declined 2.46%. Other financial indices such as times interest earned, return on asset and return on equity are also affected after the lease draft becomes effective.