Financial accountability and reporting

SoccerBoss
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Question description

1) Illustrate why in your opinion retailers with significant and long-term lease liabilities are

likely to be more affected by the new accounting standard for leases. Support your answer

with references from AASB117 Leases, your textbook, the resources presented above and

financial accounting articles and books.

 2) Explain how the gearing ratio is usually calculated and why the new accounting standard for

leases might boost such ratio, forcing some companies to renegotiate debt contracts with

bankers. Support your answer with references from AASB117 Leases, your textbook, the

resources presented above and financial accounting articles and books.

 3) Complete the following sentences with the data from the financial report 2014 pertaining to

Myer Holdings Limited, Harvey Norman Holdings Limited and Kathmandu Holdings

Limited:

In the financial year ending  30 June 2014

a) Myer has net debt around $ 348 million but the net present value of its lease liabilities

(i.e. operating leases liabilities with commitment later than one year) as disclosed in its

financial report is estimated to be around $.3.03 billion, so its total debt would jump to

$...........................

 b) Harvey Norman has net debt of $........................... but the NPV of its leases is around

$...................., so total debt would rise to $.............................

 c) Kathmandu has net debt of $............................. but the NPV of its leases is around

$......................, so total debt would rise to $...............................

 4) In relation to the answers provided in (3) identify which might be the company most affected

by the change in the accounting standard for lease and justify your answer with references

from AASB117 Leases, your textbook, the resources presented above and financial

accounting articles and books.


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