The Economic Substance of the Accounting Practice Under Reporting Standard No. 16 (Ifrs 16)of Leasing

Post by: Muthanna mjdes
November 7, 2022
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Fatima Jassim Muhammad ^*a & Ali Yusef Jabir^b

University of Basrah , college of Administration and Economics.

Abstract

The research aims to know the role that Financial Reporting Standard No. 16 plays in making the appropriate change in accounting practices in a manner that reflects the economic essence of it through the application of a proposed framework represented in capitalizing lease contracts in the financial statements of a sample of Iraqi companies for the fiscal period from (2010-2015). Through that application, the research objectives are reached and the hypothesis are tested.The most important finding of the research is that Financial Reporting Standard No. 16 came to describe the project of convergence between FASB and IASB in standardizing accounting practices with regard to accounting for lease. The efforts of the two councils to set standards for accounting for lease contracts as well as the strict conditions for capitalization of lease contracts, which covered the great flexibility that existed under previous standards such as Standard 13 and Standard 17 issued by IASB, which led to the variation in the accounting treatment of these contracts under the same facts.The research recommended obliging the economic units to prepare early for the application of Financial Reporting Standard No. 16 related to leases (IFRS 16) through the re-classification and arrangement of their assets and liabilities according to the requirements of the new standard as well as working to reflect practices. Accounting is the economic essence of the economic phenomenon, not its legal form, which helps to show the true picture of the lists of economic units.