In a newspaper article that appeared in The Australian Financial Review on 21 March 2019 entitled ‘$100b of lease liabilities head for balance sheets’ (by Vesna Poljak, p. 17), it was reported that the large listed company.

Wesfarmers had assessed the impacts of applying the requirements of AASB 16 to be an estimated increase in reported assets (via right-of-use assets) of between $5.5 billion and $6.5 billion, and an increase in reported liabilities (leases) of between $6.3 billion and $7.3 billion.

REQUIRED

How will this impact gearing ratios, and does it have potential implications for any debt covenants that the organisation might have already negotiated?