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Hi!!!
In past paper 2019 March/June Q3b i)
1) in the answer, it always raises a word “off-balance sheet leases”,I haven’t see this word in your notes, what is the meaning of “off-balance sheet leases” ?
2) in the answer, it said that the new standard IFRS 16 can provide a more accurate reflection of the economic of leases, Why? Why in the old standard can’t reflect the economy of leases accurately?
If a business BUYS or LEASES an asset, it should show the asset and related liability on the SFP, reflecting the ECONOMIC SUBSTANCE of the transaction.
Under the old leasing standard this did not happen – so business were not showing their liabilites.
Not showing liabilities = off balance sheet finance
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