Overview

This programme is part of the Professional Skills Series, designed specifically to update accountants and auditors on the new FRS 116 Leases. The new FRS differs substantially from the existing standard, and will inevitably impose a new reporting burden and have significant impact on an organisation’s financial position, financial results, leverage and capital ratios, cash flow and EBITA.

Finance Leases have historically been reported on the statement of financial position, but not operating leases. The upcoming approach to lease accounting, referred to as "The Rights of Use" model, differs substantially from the current standard. Under the new approach, a lessee will recognise an asset (the right to use the leased item), and its corresponding lease liability on the statement of financial position. This will eliminate any off-balance sheet lease accounting altogether at the present value of future lease payments.

Adopting the new standard will pose a significant challenge to organisations. They will now have to identify and review all lease contracts, gather the relevant information, determine the value of the asset and liability and prepare the new disclosures. Therefore, early adoption of FRS 116 is possible, if it is done in conjunction with the adoption of the new FRS 115 Revenue from Contracts with Customers. This will reduce the need for restatement of comparative financial reporting. 

Programme Outline

1. Leases And Off-Balance Sheet Financing

• The IASB’s Leases Project
• Summary of the new Standard
• Impact of lease accounting on debt-equity ratio, ROA, EBITDA, EBIT, net income and cash-flow classifications
• Scope of the FRS
• Exemptions from applying the FRS
• What is a lease?
• What is a lease term?

2. Accounting By Lessees

• Right of use model
• Measuring the lease liability
• Amortization and revaluation of right of use leased assets
• Reassessment of the lease liability
• Lease modifications
• Presentation and disclosure

Practice questions 1 and 2

3. Accounting By Lessors

• Classification of leases
• Finance leases- recognition and measurement
• Manufacturer or Dealer lessors
• Lease modifications
• Operating leases- recognition and measurement
• Presentation and disclosure

Practice questions 3 and 4

4. Sale and Leaseback Transactions

Practice question 5

5. Effective Date and Transition

This workshop qualifies for 7.0 CPE hours in Financial Reporting Standards and Pronouncements (Category 1).

Expert Speaker

Sardool Singh

Sardool is an Adjunct Associate Professor in the Department of Accounting of the NUS Business School. He has been lecturing for the past 20 years, and is a highly sought-after seminar leader in the areas of Financial Reporting Standards, Cash Flow Statements, Analysis of Financial Statements, Consolidation and other technical accounting topics. Sardool brings a commercial perspective to the understanding of complex Accounting Standards and simplifies the requirements of these Standards to enable the participants to have a clear understanding of the topic. Sardool is also the Chief Financial Officer of an investment company. Prior to his current appointment, he was the Group Financial Controller of a Singapore listed healthcare company. During his ten years in the healthcare industry, he was responsible for the entire Group financial functions and the IPOs of two subsidiaries on SESDAQ. He had also gained his working experience with KPMG Peat Marwick and a Japanese merchant bank.