The Impact of the Application of IFRS 16 Leases on the Benefit of Accounting Information and Decisions of Stakeholders in a Lessee Establishment-Experimental study

Leasing is one of the finance methods familiar in the contemporary business community. It is widely used by companies in various industries, enabling it to acquire and use equipment and property without resorting to buying or borrowing it. Many companies resort to leasing assets rather than buying them, especially for assets undergoing rapid technological developments, which makes spending large amounts of money to buy these assets is far from economic rationality. Some companies may resort to leasing assets due to difficulties in obtaining funds, either through increasing their capital or by borrowing. Sometimes leasing is the only way to obtain the right to use tangible assets that are not available for purchase (Xu et al., 2017). With the spread of rent as a source of funding, the problem of accounting for leases has arisen, and professional organizations have been interested in issuing accounting standards. To provide guidance on accounting for leases in both tenants and lessors, especially because the accounting policies that companies can use to handle leases can differ when the form of some contracts differs from their economic content, which sometimes leads to different accounting treatments for economically transactions. Friendly, similar. Accordingly, IASB and FASB have started a joint venture since 2006 to develop new accounting standards for leases. IASB issued IFRS 16, “Leases”, in January 2016. The FASB Council also issued the standard (ASU 842), and thus began a new era of rent accounting at least for tenants. IFRS 16 sets out the principles and principles for the recognition, measurement, presentation and disclosure of leases for both lessee and lessor parties.The standard is effective from January 1, 2019.Companies can choose to apply before this date, but only if IFRS 15 has been applied. Of contracts with customers. " IFRS 16 provides substantial changes in accounting requirements for the processing of leases, in particular to tenants, and replaces the current set of lease standards and interpretations, IAS 17, SIC 15, operating lease and motivation, and interpretation (SIC 27). - Evaluate the substance of the transactions including the legal form of rent. IFRS 16 relies on a radically different approach to accounting for leases on the basis of the “right of use” concept. The distinction between finance leases and operating leases is eliminated from the tenant's perspective, where there is one accounting model for all leases for tenants, except Short-term leases and low-value assets, therefore, all leases are recognized in the lessee's balance sheet and the only exception is short-term leases and low-value leases (PWC, 2016a). IFRS 16 requirements are expected to affect the financial statements and the financial ratios of the lessee, as the recognition of the assets and liabilities associated with the lease at the core of the balance sheet will result in an increase in the total assets and total liabilities in the statement of financial position, thereby affecting the key metrics and thus affecting the ratios. Financial, asset turnover is expected to decline and the leverage ratio is high. In addition, IFRS 16 will also affect the income statement due to the recognition of depreciation expense of 'right of use' and recognition of interest, rather than operating lease expense, thereby affecting EBIT, depreciation, and EBIT. The new standard will also affect the statement of cash flows, since the lease payments, which were presented as fully operational cash flows in the previous standard (IAS 17), will be apportioned as part of the interest on the lease obligation will be presented as operating cash flows, while cash payments for the lease obligation will be presented within Financing activities (Ozturk and Serçemeli, 2016). Although the accounting treatment for lessors has not changed substantially in the new IFRS 16, lessors should be aware of new guidelines and guidelines on the definition of lease, sale and leaseback transactions, as well as the need to understand changes in Accounting treatment of tenants because of its impact on the tenants' behaviors, the rental market and the way of negotiating with their customers (BDO, 2017). At the local level, the accounting treatment of financial leasing in Egypt is subject to IAS 20. This standard applies to financial leasing contracts made in accordance with the provisions of the Financial Leasing Law No. (95) for the year 1995 and amended by Law No. (16) for the year 2001 and its executive regulations.Egypt Standard No. (20) is completely different from the international standards. Accounting treatment of leases between Egyptian standards and international standards, because the Egyptian standard No. (20) prevails the legal form of leases on the economic essence of leases, which results in a fundamental difference in the accounting treatment of leases between international accounting standards and Egyptian standards.