'Leases' and its impact on the financial position and performance of Essay

'Leases' and its impact on the financial position and performance of companies - Essay Example Exposure Draft ED/2013/6 'Leases' and its impact on the financial position and performance of companies Financial accounting Standards Board (FASB) and International Accounting Standards Board (IASB) has revised the Exposure Draft that outlined some proposed changes in the accounting rules for leases. The reason behind such a proposal is just to improve the comparability and quality of financial reporting, by increasing the transparency related to leverage. This signifies the use of assets in the organization in its day to day operations and the exposure to risk by entering into a lease contact. The Exposure Draft has proposed a dual approach through which identification, measurement and presentation of the cash flows and the expenses related to lease can be made. Apart from this, the board has proposed some disclosure that would facilitate the investors and other users of the financial information to understand the uncertainty of cash flow, amount and timing arising from leasing (IFRS Foundation, 2013a). This study focuses on the impact of new revised accounting standards that are fra med for leases, on the financial performance and position of the organization. Delta Airlines is a major airline, which is operating in America. It is headquartered at Atlanta, Georgia. It has an extensive network serving both domestic and international location in almost every continent except Antarctica. The organization along with its subsidiaries is operating with more than 5000 flights everyday and has approximate employee strength of about 80,000. Many of its aircrafts along with some ground facilities are taken on lease (Delta Air Lines, 2013; Delta Air Lines, Inc. 2013a). Thus, following section of the reports deals with how the revised accounting standard is going to affect the company. Lease Contacts by Delta Airlines Operating lease may act as an attractive option for the airlines industry as it increases the flexibility of the fleet, reduces the residual risk related to the aircraft for the aircraft industry and requires lower amount of capital commitment for the airline company. During the year 2012, Delta Air lines have entered into contact with T he Boeing Company and Southwest Airlines, to lease eighty eight B-717-200 aircraft. In the later part of 2012, these aircrafts were delivered. In the first fleet, 16 aircrafts were delivered and thirty six aircrafts will be delivered in 2014 and 2015 respectively. The B-717-200 aircraft that has been leased by the company will have advanced features like new and fully upgraded interiors, total seats of 110 that comprises of 15 Economy Comfort seat and 12 First Class seat, along with in-flight Wi-Fi (Delta Air Lines, Inc. 2013b). Thus, it can be expected to generate more income. Apart from this, most of the ground facilities of Delta are also on lease. Most of the lands and building that are occupied by the organization are on lease. The largest base for aircraft maintenance, principal offices, training facilities, kitchens, cargo and