Word limit of this report should not be less than 10% of word limit (900 words) and exceeds 1100 words (excluding executive summary, references and appendix). A loss of 10% of the total marks will apply if you didn’t follow this instruction.
Instructions for the report
Find an annual report for the 2015/2016 or 2016/2017 financial year. Remember to use a complete annual report, not a concise financial report or a half-year financial report.
This task requires you to prepare a report of Air New Zealand to evaluate and comment on information regarding leases provided in the annual report of a company Air New Zealand listed on the Australian Stock Exchange (ASX). Your comments or evaluation should comply with the requirements of relevant Australian accounting standards (AASBs).
PWC states that ‘The new requirements (of IFRS 16) eliminate nearly all off balance sheet accounting for lessees and redefine many commonly used financial metrics such as the gearing ratio and EBITDA. This will increase comparability, but may also affect covenants, credit ratings, borrowing costs and your stakeholders’ perception of you.’ (accessed from https://www.pwc.com.au/assurance/ifrs/assets/ifrs16lease-brochure.pdf)
AASB 16 Leases was released in February 2016 in Australia. In this report, you should address the points outlined below:
Part A
1) Discuss the recognition criteria for a lease according to relevant AASBs.
2) Identify the differences between finance lease and operating lease.
3) Identify at least one example of a finance lease and an operating lease reported in the
annual report of the chosen company.
Part B
From the perspective of the lessees, discuss the potential implication of the adoption of new
AASB 16 Leases on assets, liabilities and debts, leverage, accounting-based debt covenants,
expenses and profit of the chosen company. You should include the examples that you
identified in part A3) in your discussion.
Further information regarding the report:
• The report should include an executive summary, a body of contents covering points listed above, and a reference list. ?
• Sections extracted from the annual report or AASB to support your report should be included in the Appendix. Also, provide specific page numbers of the annual report and paragraph numbers of AASBs as in-text reference in your report such as annual report note 10 and AASB 101.26. If you choose to ignore this instruction, you will lose marks. ?Assessment criteria:?The quality of the report will be assessed based on the following four areas:
. 1) Demonstrate and identify the accounting concepts applied. ?
. 2) Use paragraphs from related Australian Accounting Standard as guidelines to support ?your discussion. ?
. 3) Provide example(s) from the annual report to illustrate the implementation of an ?accounting concept(s) or principle(s) discussed. ?
. 4) Demonstrate effective communication, referencing, logical presentation and ?integrated evaluation.