Jeden Monat erstellt Carsten Ernst, Geschäftsführender Gesellschafter bei der WirtschaftsTreuhand, einen Beitrag zu Themen der internationalen Rechnungslegung. Hier finden Sie den Beitrag für Januar 2021.

Has the plane landed?

First of all, we would like to use this first newsletter in 2021 to wish you and your loved ones all the very best for 2021. We all hope that we will soon be able to meet again in person at our AGN events.

The beginning of the year is always a good time to think about what goals you want to achieve in your life. And that brings us to the topic at hand. Sir David Tweedie (former Chairman of the IASB) had once expressed the following life wish: „One of my great ambitions, before I die, is to fly in an aircraft that is on an airline’s balance sheet.“

Quite apart from the question of whether there aren’t more meaningful life wishes than this, we want to explore the question of whether Sir Tweedie’s wish has come true with the new IFRS 16 as part of a short newsletter series.

While the ‘old’ IAS 17 standard was exceptionally well-thought-out – as all of us can confirm from practical experience – there were often major deficits in how it was applied by preparers of financial statements.

That might be understandable from the perspective of companies themselves, which frequently sought to make assets (for example airoplanes) and most of all liabilities go ‘off balance sheet’ by ‘creative’ lease accounting. They thus had a way of tweaking key ratios and management parameters, such as the equity ratio (equity to total assets) and the debt ratio (total liabilities to total assets). However, this did not always reflect the economic substance of the transaction.

Which is where the new standard comes in: IFRS 16 aims to fetch all those assets and liabilities back onto the statement of financial position. We will address the main principles of IFRS 16 in a short series of IFRS Newsletters in the months ahead.

Should you ever lose track of the big picture, my colleagues and I will be happy to help and guide you safely through the IFRS accounting jungle. Contact me by email at carsten.ernst@wirtschaftstreuhand.de .

Happy accounting,

Carsten