Question 4 As a major player in the Travel and Leisure industry, TUI Group's transition to applying IFRS 16 is expected to be apparent in their subsequent financial accounts. Their 2018 annual report, prior to the effective date of IFRS 16, confirms that the new standard "will have a significant impact on all parts of the consolidated financial statements and the presentation of the Groups Financial Position, net assets and earnings position". A leading impact is the treatment of operating leases under IAS 17, which were essentially off-balance sheet items. The annual report of TUI shows that, as of September 2018, the company had operating leases of 2,810.9 million (see below). This value is significant considering that the total equity of the company is 4,333.6 million, while the total non-current provisions and liabilities are 4,390.5 million. Below are extracts on leases from The Annual Report of the TUI Group 2018. Financial commitments from operating lease and rental contracts 30 Sep 2018 Remaining term 1-5 5-10 more than Total million 10 years up to 1 year years years 919.4 383.4 229.8 632 353.0 1203 2285 83.0 24.0 158 94 48 1.547.1 6752 2123 Aircraft Hotel complexes Travel agencies Administrative buildings Ships, Yachts and Motorboats Other Total 40.3 113.9 536 362 244.0 1.0 28.9 746.6 43.4 1,550.0 73 396.4 51.7 117.9 1.0 1313 2,810.9 (a) Based on the nature of Tul's operations, and on information from the extracts above, identify a specific leased asset that is crucial to the TUI Group 2018. Describe how IFRS 16 will impact accounting for this specific asset in future years. [8 marks] (b) The need to account for lease transactions in a useful way proves that the principle of substance over form is essential. Critically discuss this statement, using information provided from the Annual Report of the TUI Group 2018 where appropriate. [22 marks] [Total 30 Marks]