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The new leasing standard, AASB 16, requires that all operating leases appear on the balance sheet
The new leasing standard, AASB 16, requires that all operating leases appear on the balance sheet. Previously operating leases were not disclosed on the statement of financial position (balance sheet) but where instead included within the notes to the accounts. Which of the following ratios will be affected by the change in accounting standard.
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Return on Equity (Operating Profit/Average Ordinary Shareholders Equity) |
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Return on Assets (Operating Profit/Average Total Assets) |
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Debt to Equity Ratio (Total Liabilities/Total Equity) |
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All of the above |
Expert Solution
Option ,all of the above
Reason: Reporting operating leases on the balance sheet will increase the assets since the leases are reported as capitalized operating leases. The liabilities increase due This will impact both return on assets and debt equity ratio. Also the depreciation is impacted which will impact the return on equity.
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