Question
Off-balance-sheet (OBS) leases have historically allowed firms to make fixed-cost capital expenditures without recognizing them on the balance sheet. However, the Financial Accounting Standards Board
Off-balance-sheet (OBS) leases have historically allowed firms to make fixed-cost capital expenditures without recognizing them on the balance sheet. However, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are reforming accounting standards for lease financing. The expected result of this joint initiative is a change toward recognizing lease obligations on the balance sheet (Cornaggia et al. p. 345).
Cornaggia, K. J., Franzen, L. A., & Simin, T. T. (2013). Bringing leased assets onto the balance sheet. Journal of Corporate Finance, 22, 345-360.
Required
Discuss to what extent you believe that the attempt made by the IASB in its new standard IFRS 16 to incorporate all types of leases recorded on the balance sheet will be a success. Support your answer with relevant examples.
[TOTAL: 25 MARKS]
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