The Reasons Why IAS 17 Lease Was Replaced By IFRS 16

Accounting for leases by most countries is very comparable, in that most countries require the application of principles similar to those in IAS 17 (Leases). However, it is also recognized that the accounting principles applied are flawed.  In July 2006, as a result of the agreement between the IASB and the FASB to converge accounting standards, a joint working party was formed between the two bodies to propose a new accounting standard on leases. The aims of the project were stated as:  to produce an improved accounting standard that faithfully …

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Gain Or Loss On A Sale And Leaseback Transaction

The accounting treatment prescribed by IAS 17  relating to any gain or loss on the sale of an asset in a sale and leaseback transaction may result in the deferral of such gains or losses and their amortization over the lease term. The Conceptual Framework does not support this accounting treatment, because it results in reporting debit and credit balances in the statement of financial position that do not meet the definitions of assets and liabilities. The Conceptual Framework in paragraph 4.4(b) defines a liability as:  a present obligation of …

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Accounting For Sale And Leaseback Transactions

Accounting For Sale And Leaseback Transactions : A ‘sale and leaseback’ is a lease transaction that creates an accounting problem for lessees. Effectively, this type of arrangement involves the sale of an asset that is then leased back from the purchaser for all or part of its remaining economic life. Hence, the original owner becomes the lessee but the asset itself does not move. In substance, the lessee gives up legal ownership but still retains control over some or all of the asset’s future economic benefits via the lease agreement. …

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Different Types Of Dividends | When Is Dividend Recognized

Dividends are a distribution from the company to its owners. It is generally the case, under companies legislation, that dividends can be paid only from profits, and not from capital. In some jurisdictions, companies must comply with a solvency test before paying dividends. The purpose in both situations is to protect the creditors, as any money paid to shareholders is money unavailable for paying creditors. Different Types Of Dividends : Dividends are sometimes divided into interim dividends and final dividends. Interim dividends are paid during the financial year, while final …

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Difference Between Retained Earnings And Reserves

Retained Earnings And Reserves are very confusing accounting term because there is a minor difference in between them. Some thinks them synonymous. However, lets have a brief discussion on this two topics first before making difference in between them. Reserves : ‘Reserves‘ is the generic term for all equity accounts other than contributed equity. A major component is the retained earnings account. This account accumulates the annual profit or loss earned by an entity, and is the primary account from which appropriations are made in the form of dividends. The …

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Methods Of Cash Flow Statement

 The cash flow provides information on a company’s earnings and financial strength. Cash flow is particularly important for creditors and investors as well as shareholders of a company.  Cash Flow Statement is dealt in IAS 7. 1) Definitions of Cash flow Cash flow is the surplus of regular operating income over regular operating expenses. It thus provides the cash reserves that can be generated sustainably from the company’s operations in order to cover specific operating expenses. The cash flow quantifies the surplus, which results when the expenditure is deducted from …

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Methods Of Protectionism In International Trade

The various arguments have been advanced in favor of the policy of protection. Under protectionism, the domestic industries are protected from the competition of foreign goods. The home industries are granted protection in any one or more of the following ways: 1. Protective Duties. With a view to make the imports costly, when the government imposes duties on the imports of foreign goods, such duties are called protective duties. Such duties may be ad-valorem (according to the value of imports) or specific (according to the weight or measurement). When the …

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Importance Of Protectionism In International Trade

Protectionism is the rule of the day. The various arguments have been advanced in favor of the policy of protection. Besides those arguments, there are certain other special reasons to explain why an underdeveloped country adopts the policy of protectionism- 1. To Promote Industrialization. Under developed countries need rapid industrialization. They are predominantly agricultural countries and export primary goods to developed countries which are generally used by them as raw materials. But developing Countries lack in capital resources and necessary technical expertise to establish new industries. By importing necessary expertise, …

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Arguments Against Protectionism In International Trade

Protectionism provides ample opportunities for the expansion of home market for domestic industries. By cutting imports, the government encourages the sale of homemade goods within the country.  But is is not free from criticism. The following arguments can be put forward against the policy of protectionism are given below. Arguments Against Protectionism 1. Encouragement to inefficient Industries. Under free trade policy, there is no place of uneconomic and nonviable or weak industrial units because of tough foreign competition. But, under protectionism, the domestic industries are not warded about the foreign …

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Arguments In Favour Of Protectionism

The Protectionism ensures the protection of home industries from foreign competition, encouraging them to raise production and generate more employment opportunities in the economy. For this purpose government imposes a number of restrict ions on imports and exports of the country through fiscal and other economic measure. Arguments In Favour Of Protectionism Today, almost all the countries of the world have abandoned the policy of free trade and have adopted the ‘protection policy.’ The following arguments can be adduced in favor of protectionism. 1. Protection of Infant Industries. The infant …

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