Demonstrate an understanding of the structure of the international professional and conceptual framework of accounting: International Financial Reporting and Analysis Assignment, GCD, Ireland

IFRS & global Harmonisation IFRS 16

Learning Outcomes Assessed:

1. Demonstrate an understanding of the structure of the international professional and conceptual framework of accounting.

2. Apply relevant international financial reporting standards to key elements of financial reports, including disclosure requirements.

Part (A)

“The aim of the International Financial Reporting Standards (IFRS) is to achieve Global Harmonisation of the preparation of Financial Statements”

Required:

Analyze the above statement by researching the standard-setting body and the challenges they are facing to achieve global harmonization.

Part (B)

1) In January 2016, the International Accounting Standards Board (IASB) released International Financial Reporting Standard (IFRS) 16, Leases.

Required:
Research the reasons the new Standard was required.

2) On 1 January 2019, Lotus entered into a contract to lease a specialized machine for three years. The contract contains an option to extend the lease term for a further year. Lotus believes that it is reasonably certain to exercise this option. The machine has a useful life of ten years.

Lotus will make lease payments of $1 million per year for the initial term and $0.8 million per year for the option period. All payments are due at the end of the year. To obtain the lease, Lotus incurs initial direct costs of $0.1 million. The effective interest rate on the lease is 10%. The Present Value of the lease liability on 1 January 2019 is $3,040,000.

Required:

Evaluate how Lotus should account for the lease at inception and at year ended 31  December 2020, illustrate with the extracts for the financial statements for the year ended 31 December 2020 Evidence of research and professional presentation of appropriate academic work correctly referenced using the Harvard Referencing System.