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Jan 2012

Study of LKAS 17: Leases

A New Sri Lankan lease accounting standard has been developed in a joint project between the International Accounting Standards Board (IASB) and the Institute of Chartered Accountants of Sri Lanka (ICASL) that could result in a complete overhaul of the way in which leases are reported in financial statements, commencing 1 January 2012.

Industry projections estimate over $1.3 trillion would be transferred to U.S. corporate balance sheets, with roughly 70% being real estate leases. The impact on the Sri Lankan leasing industry had not been quantified yet and the objective of this paper is to enlighten the reader of the consequences arising from the new standard to corporate financial statements. Presented below are the significant changes that are anticipated in the new standard, some issues and impact they create, and some of the ways the management accountant can add value to the organisation in coping with these changes.

As it is common for any accounting standard, LKAS 17 also would contribute to fulfil the accounting concept of consistency in financial statements, with regard to accounting treatment of a lease.

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Study of LKAS 17: Leases