Financial Impact Of Changes In Lease Accounting Standards On Airlines Analysis

At present,the main way for domestic airlines to introduce aircraft is to carry out corresponding leasing business,which not only can quickly improve the transportation capacity of airlines,but also bring huge financing effects to airlines.By the end of 2018,there were more than 3,700 domestic aircraft in service,and more than half of them were introduced by lease.The new version of the leasing accounting standard IFRS16 was officially promulgated in 2016.Although China’s modern leasing industry started late,it has always followed the international pace closely.In 2018,the Ministry of Finance also officially promulgated the new leasing accounting standard CAS21,and it will be implemented in batches respectively in January 2019 and January 2021.For the tenant’s all leasing business,the new leasing criteria require the use of the "right to use model" to measure,which is very effective for eliminating the loopholes in the operation of the operating leases for off balance sheet financing.However,the civil aviation industry is a typical heavy rental asset industry.The application of new standards by airlines must be greatly affected in accounting recognition,measurement,and presentation.How to deal with corresponding financial risks has become a problem that needs to be solved immediately.Based on this,this article selects Air China as a case to explore its related impact after applying the new lease standard.The first chapter of this paper mainly reviews and summarizes the existing accounting information quality of the old leasing standards,whether the leasing standards should be revised,and the expected impact of the revision of the leasing standards,and then leads to the research content and ideas of this paper.In the second chapter,based on the collation of the research literature at home and abroad,it expounds the substantial revision content of the new leasing standards and the main reasons for its revision,and introduces the concept and classification of aviation leasing,which paves the way for the later chapters.In addition,this chapter also introduces the relevant theories of leasing from three aspects: economic consequences,information differences and accounting theories.The third chapter first introduces the general situation and current operation of Air China,and then describes the basic situation of Air China’s current leasing assets,and analyzes the reasons for Air China’s leasing business from three perspectives of capital flow pressure,leasing advantages and characteristics and national policies.The fourth chapter,based on the operating lease information disclosed in Air China’s annual report in 2018,restates the accounting recognition,measurement and presentation of operating lease business in the current period in accordance with the applicable new lease standards,and analyzes the changes in the book value of relevant assets and liabilities in the future lease term.The fifth chapter mainly analyzes the main changes and corresponding risks of Air China’s financial indicators from the aspects of solvency,operation ability and profitability on the basis of the last chapter.At the same time,this chapter also describes the possible impact on Air China’s future leasing business decision-making.The sixth chapter is the conclusion of the case analysis and the related suggestions.The conclusions of this paper are as follows:(1)The new leasing standards can better reflect the essence of leasing business and improve the quality of leasing information;however,they will expose the real financial situation,and all financial indicators will decline to varying degrees,which will affect the financing ability of enterprises,and further aggravate the financial risk,interest rate risk and exchange rate risk of enterprises.(2)The new leasing standards will lead the enterprise’s relevant expenses to move forward and the profit to be "low before and high after";the application of the new standards in the early stage will lead to the decline of the enterprise’s profit level,which is not conducive to performance evaluation.(3)The new leasing standard requires more professional judgment in the specific operation process,more complicated accounting recognition and measurement,and higher professional requirements for financial personnel.(4)Airline companies will reduce the proportion of operating lease business,and prefer to use financial leasing to introduce aircraft.In short,no matter how the leasing criteria change,the introduction of aircraft through leasing business will be an essential way of the airline.Airlines should strengthen the research and study of the standards,adjust the asset management mode,improve the corresponding accounting information system,innovate the leasing business planning to actively respond to the financial impact of the new leasing standards;and deal with interest rate risk and exchange rate risk through various derivative financial instruments and protective clauses.In addition,the relevant departments and enterprises should also strengthen communication to promote the smooth implementation of the new leasing criteria.The main contributions of this article:(1)The research on the expected impact of the new leasing standards focuses on the overall financial impact,Rarely combine domestic enterprises to carry out specific exploration;Based on the analysis of the financial impact,this paper studies the future impact of Air China’s aircraft leasing business and enriches the relevant literature.(2)The new leasing standard is in the stage of distributed implementation.This paper takes the state-owned holding airlines as the case to study,which can better reflect the impact and problems brought by the new leasing standard,and can provide reference experience for other enterprises that are about to implement the new leasing standard,as well as help relevant departments to continuously improve the standard.