What are the advantages and disadvantages of IAS 17?

Answer 1

IAS 17, which governs lease accounting, provides clear guidelines for distinguishing between finance and operating leases, allowing for consistency in financial reporting. One advantage is that it enhances comparability across entities by standardizing lease treatment. However, a significant disadvantage is that it can lead to off-balance-sheet financing for operating leases, potentially distorting a company's financial position. Additionally, the complexity of lease classification can lead to inconsistent application and increased administrative burden for companies.