Investigation of IFRS16 Effect on the Airlines

Jin Yu

doi:doi:10.11648/j.jfa.20190705.11

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Investigation of IFRS16 Effect on the Airlines

Jin Yu

Published in Journal of Finance and Accounting (Volume 7, Issue 5)

Received: 10 August 2019 Accepted: 24 August 2019 Published: 9 September 2019

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Abstract

Under IAS17, operating leases can be reported in the notes of financial statements, so operating leases are not recognized in statements of financial position, and the lease payments are recognized as expenses and recorded in statements of profit and loss. Therefore, operating leases have the nature of off-balance sheet, and keeping operating leases off of the balance sheet has been the veil of the true nature of a company’s liabilities. To increase the transparency of company’s lease liabilities, IFRS 16 changes the way that lessees disclose operating leases in their financial statements. and relevant financial ratios including debt to asset ratio, asset turnover ratio and EBITD will also change. PwC, Deloitte, KPMG and Ernst & Young provide guides to help companies execute the new accounting standard, and they foresee that some industries will be influenced on the basis of the degree of dependence on operating leases. This paper will compare the accounting treatment of leases in IAS17 and IFRS16, and the impact on airlines will be analyzed from financial statements and financial ratios. For operating leases, the advantage of off-balance sheet will disappear, so Airlines that rely heavily on operating leases should consider the impact of lease capitalization on their businesses.

Published in	Journal of Finance and Accounting (Volume 7, Issue 5)
DOI	10.11648/j.jfa.20190705.11
Page(s)	132-135
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Lease Accounting, IAS17, IFRS16

References

[1]	IASB. (2016). IFRS 16 Leases. [Online]. Available from: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/ [Accessed: 14/12/2018].
[2]	Giner, B. & Pardo, F. (2018). The Value Relevance of Operating Lease Liabilities: Economic Effects of IFRS 16. Australian Accounting Review. Vol. 28 Issue. 9 p495-511.
[3]	Kabir, H. & Rahman, A. (2018). How Does the IASB Use the Conceptual Framework in Developing IFRSs? An Examination of the Development of IFRS 16 Leases. Journal of Financial Reporting. Vol. 3 Issue. 1 p93-116.
[4]	Zamora-Ramirez, C. & Morales-Diaz, J. (2018). Effects of IFRS 16 on Key Financial Ratios of Spanish Companies. Estudios de Economia Aplicada. Vol. 36 Issue. 2 p385-405.
[5]	Morales-Diaz, J. & Zamora-Ramirez, C. (2018). The Impact of IFRS 16 on Key Financial Ratios: A New Methodological Approach. Accounting in Europe. Vol. 15 Issue. 1 p105-133.
[6]	Yu, H. Y. (2017). Analysis on the Impact of the application to IFRS 1 6 by China Southern Airlines [D]. Beijing Jiao Tong University.
[7]	Xu, F. & Liu, S. C. (2018). The Impact of IFRS16 Leasing Standard on Airlines: Taking Eastern Airlines as an Example. MODERN ACCOUNTING. Issue 9 p18-24.
[8]	PwC. (2016). IFRS 16-The new leases standard. [Online]. Available from: https://www.pwc.com/gx/en/services/audit-assurance/assets/ifrs-16-new-leases.pdf [Accessed: 19/12/2018].
[9]	China Southern Airlines 2015-2017 Annual Reports.
[10]	Air China 2015-2017 Annual Reports.
[11]	China Eastern Airlines 2015-2017 Annual Reports.
[12]	IASB. (2003). IAS 17 Leases. [Online]. Available from: https://www.ifrs.org/issued-standards/list-of-standards/ias-17-leases/ [Accessed: 14/12/2018].
[13]	Deloitte. (2016). Leases A guide to IFRS 16. [Online]. Available from: https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/audit/sea-audit-IFRS-16-guide.pdf [Accessed: 15/12/2018]
[14]	Stebbens, P. et al. (2016). IFRS 16 Leases Overview. [Online]. Available from: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/03/ifrs16-leases-webinar-presentation-slides-march-2016.pdf [Accessed: 18/12/2018].
[15]	KPMG. (2016). IFRS 16: Leases- A Step towards a more Transparent Balance sheet. [Online]. Available from: https://assets.kpmg.com/content/dam/kpmg/ng/pdf/audit/ifrs-16-leases-a-step-towards-a-more-transparent-balance-sheet.pdf [Accessed: 21/12/2018].
[16]	EY. (2018). IFRS 16 Lease overview and EY’s enabling toolkit. [Online]. Available from: https://www.ey.com/Publication/vwLUAssets/EY_-_IFRS_16_Lease_Workshop/$FILE/EY_IFRS%2016_Lease_Workshop.pdf [Accessed: 28/12/2018].
[17]	PwC. (2017). At a glance Tax accounting considerations of IFRS 16. [Online]. Available from: https://www.pwc.nl/nl/assets/documents/tax-accounting-considerations-of-ifrs16.pdf [Accessed: 20/12/2018].
[18]	PwC. (2016). In the Spotlight Impact of IFRS 16 to Airlines. [Online]. Available from: https://www.pwccn.com/en/ifrs/ifrs16-aerospace-may2016.pdf [Accessed: 27/12/2018].

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APA Style

Jin Yu. (2019). Investigation of IFRS16 Effect on the Airlines. Journal of Finance and Accounting, 7(5), 132-135. https://doi.org/10.11648/j.jfa.20190705.11

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ACS Style

Jin Yu. Investigation of IFRS16 Effect on the Airlines. J. Finance Account. 2019, 7(5), 132-135. doi: 10.11648/j.jfa.20190705.11

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AMA Style

Jin Yu. Investigation of IFRS16 Effect on the Airlines. J Finance Account. 2019;7(5):132-135. doi: 10.11648/j.jfa.20190705.11

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@article{10.11648/j.jfa.20190705.11,
  author = {Jin Yu},
  title = {Investigation of IFRS16 Effect on the Airlines},
  journal = {Journal of Finance and Accounting},
  volume = {7},
  number = {5},
  pages = {132-135},
  doi = {10.11648/j.jfa.20190705.11},
  url = {https://doi.org/10.11648/j.jfa.20190705.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20190705.11},
  abstract = {Under IAS17, operating leases can be reported in the notes of financial statements, so operating leases are not recognized in statements of financial position, and the lease payments are recognized as expenses and recorded in statements of profit and loss. Therefore, operating leases have the nature of off-balance sheet, and keeping operating leases off of the balance sheet has been the veil of the true nature of a company’s liabilities. To increase the transparency of company’s lease liabilities, IFRS 16 changes the way that lessees disclose operating leases in their financial statements. and relevant financial ratios including debt to asset ratio, asset turnover ratio and EBITD will also change. PwC, Deloitte, KPMG and Ernst & Young provide guides to help companies execute the new accounting standard, and they foresee that some industries will be influenced on the basis of the degree of dependence on operating leases. This paper will compare the accounting treatment of leases in IAS17 and IFRS16, and the impact on airlines will be analyzed from financial statements and financial ratios. For operating leases, the advantage of off-balance sheet will disappear, so Airlines that rely heavily on operating leases should consider the impact of lease capitalization on their businesses.},
 year = {2019}
}

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TY  - JOUR
T1  - Investigation of IFRS16 Effect on the Airlines
AU  - Jin Yu
Y1  - 2019/09/09
PY  - 2019
N1  - https://doi.org/10.11648/j.jfa.20190705.11
DO  - 10.11648/j.jfa.20190705.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 132
EP  - 135
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20190705.11
AB  - Under IAS17, operating leases can be reported in the notes of financial statements, so operating leases are not recognized in statements of financial position, and the lease payments are recognized as expenses and recorded in statements of profit and loss. Therefore, operating leases have the nature of off-balance sheet, and keeping operating leases off of the balance sheet has been the veil of the true nature of a company’s liabilities. To increase the transparency of company’s lease liabilities, IFRS 16 changes the way that lessees disclose operating leases in their financial statements. and relevant financial ratios including debt to asset ratio, asset turnover ratio and EBITD will also change. PwC, Deloitte, KPMG and Ernst & Young provide guides to help companies execute the new accounting standard, and they foresee that some industries will be influenced on the basis of the degree of dependence on operating leases. This paper will compare the accounting treatment of leases in IAS17 and IFRS16, and the impact on airlines will be analyzed from financial statements and financial ratios. For operating leases, the advantage of off-balance sheet will disappear, so Airlines that rely heavily on operating leases should consider the impact of lease capitalization on their businesses.
VL  - 7
IS  - 5
ER  -

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Author Information

Jin Yu

Business School, Chengdu University of Technology, Chengdu, P. R. China

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APA Style

Jin Yu. (2019). Investigation of IFRS16 Effect on the Airlines. Journal of Finance and Accounting, 7(5), 132-135. https://doi.org/10.11648/j.jfa.20190705.11

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ACS Style

Jin Yu. Investigation of IFRS16 Effect on the Airlines. J. Finance Account. 2019, 7(5), 132-135. doi: 10.11648/j.jfa.20190705.11

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AMA Style

Jin Yu. Investigation of IFRS16 Effect on the Airlines. J Finance Account. 2019;7(5):132-135. doi: 10.11648/j.jfa.20190705.11

Copy | Download

@article{10.11648/j.jfa.20190705.11,
  author = {Jin Yu},
  title = {Investigation of IFRS16 Effect on the Airlines},
  journal = {Journal of Finance and Accounting},
  volume = {7},
  number = {5},
  pages = {132-135},
  doi = {10.11648/j.jfa.20190705.11},
  url = {https://doi.org/10.11648/j.jfa.20190705.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20190705.11},
  abstract = {Under IAS17, operating leases can be reported in the notes of financial statements, so operating leases are not recognized in statements of financial position, and the lease payments are recognized as expenses and recorded in statements of profit and loss. Therefore, operating leases have the nature of off-balance sheet, and keeping operating leases off of the balance sheet has been the veil of the true nature of a company’s liabilities. To increase the transparency of company’s lease liabilities, IFRS 16 changes the way that lessees disclose operating leases in their financial statements. and relevant financial ratios including debt to asset ratio, asset turnover ratio and EBITD will also change. PwC, Deloitte, KPMG and Ernst & Young provide guides to help companies execute the new accounting standard, and they foresee that some industries will be influenced on the basis of the degree of dependence on operating leases. This paper will compare the accounting treatment of leases in IAS17 and IFRS16, and the impact on airlines will be analyzed from financial statements and financial ratios. For operating leases, the advantage of off-balance sheet will disappear, so Airlines that rely heavily on operating leases should consider the impact of lease capitalization on their businesses.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Investigation of IFRS16 Effect on the Airlines
AU  - Jin Yu
Y1  - 2019/09/09
PY  - 2019
N1  - https://doi.org/10.11648/j.jfa.20190705.11
DO  - 10.11648/j.jfa.20190705.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 132
EP  - 135
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20190705.11
AB  - Under IAS17, operating leases can be reported in the notes of financial statements, so operating leases are not recognized in statements of financial position, and the lease payments are recognized as expenses and recorded in statements of profit and loss. Therefore, operating leases have the nature of off-balance sheet, and keeping operating leases off of the balance sheet has been the veil of the true nature of a company’s liabilities. To increase the transparency of company’s lease liabilities, IFRS 16 changes the way that lessees disclose operating leases in their financial statements. and relevant financial ratios including debt to asset ratio, asset turnover ratio and EBITD will also change. PwC, Deloitte, KPMG and Ernst & Young provide guides to help companies execute the new accounting standard, and they foresee that some industries will be influenced on the basis of the degree of dependence on operating leases. This paper will compare the accounting treatment of leases in IAS17 and IFRS16, and the impact on airlines will be analyzed from financial statements and financial ratios. For operating leases, the advantage of off-balance sheet will disappear, so Airlines that rely heavily on operating leases should consider the impact of lease capitalization on their businesses.
VL  - 7
IS  - 5
ER  -

Copy | Download