QUESTIONS:
1) Illustrate why in your opinion retailers with significant and long-term lease liabilities are
likely to be more affected by the new accounting standard for leases. Support your answer
with references from AASB117 Leases, your textbook, the resources presented above and
financial accounting articles and books.
2) Explain how the gearing ratio is usually calculated and why the new accounting standard for
leases might boost such ratio, forcing some companies to renegotiate debt contracts with
bankers. Support your answer with references from AASB117 Leases, your textbook, the
resources presented above and financial accounting articles and books.
3) Complete the following sentences with the data from the financial report 2014 pertaining to
Myer Holdings Limited, Harvey Norman Holdings Limited and Kathmandu Holdings
Limited:
In the financial year ending 30 June 2014
a) Myer has net debt around $ 348 million but the net present value of its lease liabilities
(i.e. operating leases liabilities with commitment later than one year) as disclosed in its
financial report is estimated to be around $.3.03 billion, so its total debt would jump to
$………………………
b) Harvey Norman has net debt of $……………………… but the NPV of its leases is around
$……………….., so total debt would rise to $………………………..
c) Kathmandu has net debt of $……………………….. but the NPV of its leases is around
$…………………., so total debt would rise to $………………………….
4) In relation to the answers provided in (3) identify which might be the company most affected
by the change in the accounting standard for lease and justify your answer with references
from AASB117 Leases, your textbook, the resources presented above and financial
accounting articles and books.