Ask the Expert: AASB 16

David Holland, Moore Stephens National Head of Technical Accounting, offers his advice on technical and compliance issues that impact businesses.

Issue
How will the new leases standard impact companies that either don’t lodge accounts with ASIC or prepare special purpose accounts? The reports prepared are mainly for internal management purposes and to satisfy banking requirements (i.e. ensure banking covenants are met).
 
Conclusion
AASB 16 requires the capitalization of most leases.  Where special purpose accounts are prepared and lodged with ASIC then according to RG 85 they should comply with the recognition and measurement requirements of accounting standards (which would include leases).  Recognising lease assets and liabilities under AASB 16 will also change tax effect accounting entries.
 
Where financial reports aren’t required to be lodged with ASIC (i.e. small pty company) then you should consider if:  
Background
ASIC guide RG 85 Reporting requirements for non-reporting entities
‘the recognition and measurement requirements of accounting standards must also be applied in order to determine the financial position and profit or loss of any entity preparing financial reports in accordance with the Act’.