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The impact of IFRS 16 on transparency of financial statements

The main mission of the International Accounting Standard Board is that by unique accounting rules ensure a transparency, accountability, efficiency and comparability of financial information’s from the financial statements which are crucial for stability of financial markets. With the aim of consistent and reliable financial statements International Accounting Standard Board has adopted a new International Financial Reporting Standard 16 – Leases. By this new standard they want to eliminate the effect called off-balance sheet financing. The effect off-balanced sheet financing was manifested in the incomplete presentation of financial statements. Because of incomplete financial statements the external users (investors, suppliers and others) could not see the complete liabilities arising from the lease, which leads to misperceptions of company financial position. The new International Financial Reporting Standard 16-Leases introduces a unique lease accounting model which require that all assets deriving from lease and related liabilities should be presented in the balanced sheet. Presenting all assets and related liabilities resulting from lease in the balance sheet would impact and other financial statement what lead to increasing transparency of financial statements.

IFRS 16, transparency, financial statements

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