Accounting Policy Decision Model

Question 1

Steps for a basic accounting policy decision model

Answer 1

1. Identify the relevant facts including key stakeholders
2. Define the accounting policy issue(s)
3. Identify relevant accounting standards, rules, & principles
4. Identify alternative accounting treatments
5. For each alternative, decide to what extent the particular alternative satisfies the rules/principles in 3 above AND identify the short & long term consequences
6. choose an accounting policy

Question 2

What is the title of AASB 16

Answer 2

Leases

Question 3

What recognition exemptions exist in AASB 16 for lessee’s?

Answer 3

Short term leases and assets of low value. If a lessee elects not to recognise, the lessee shall recognise the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

Question 4

How should a lessor recognise/ classify it’s leases?

Answer 4

as either an operating lease or a finance lease

Question 5

What is the difference between an operating lease and a finance lease?

Answer 5

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.