Previous leasing standards have been criticized about the lack of information they required to be disclosed on leasing transactions. These concerns were usually expressed by investors and so AASB 16/ IFRS 16 Leases was issued in response to these criticisms.

Required:

* Discuss some of the key changes to financial statements with investors will see when companies apply the lease accounting requirements in AASB 16 / IFRS 16.

* For a company with significant off-balance sheet leases, discuss the likely impact that AASB 16 / IFRS 16 will have generally on accounting ratios and particularly on:

1. i. Earnings before interest and tax to interest expense (interest cover);
2. ii. Earnings before interest and tax to capital employed (Return on capital employed);
3. iii. Debt to earnings before interest, tax, depreciation and amortisation (EBITDA)