Was the change in accounting standard favourable to the financial reporting of AirAsia? From IAS 17 Leases to IFRS 16 Leases

Abstract

Theoretical basis

This case uses agency theory and decision usefulness approach to justify whether the change in accounting standard from IAS 17 Leases to IFRS 16 Leases favourably or adversely affects AirAsia’s financial reporting.

Research methodology

This case was written based on secondary data contained in industry reports, company annual reports, company websites, news reports and accounting standards. The case has been classroom-tested with undergraduate students taking advanced financial accounting and reporting module.

Case overview/synopsis

AirAsia Group Berhad (AirAsia), a Malaysian multinational low-cost carrier, was required to adopt IFRS 16 Leases (equivalent to MFRS 16 Leases), effective from 1 January 2019. The new standard, superseding IAS 17 Leases, was expected to provide investors and creditors with a richer insight into AirAsia’s leasing transactions and financial situations. In view of AirAsia having a substantial fleet of leased aircraft, the adoption of IFRS 16 Leases would change the way AirAsia had to report its borrowings which could subsequently have an impact on its bottom line. Thus, this case requires students to examine the financial implications of adopting IFRS 16 Leases by AirAsia and to determine whether the change in accounting standard favourably or adversely affects AirAsia’s financial reporting.

Complexity academic level

This case is intended for use in intermediate and advanced financial accounting and reporting modules at the undergraduate level.

Citation

Ooi, S.C. and Lim, C.C. (2022), "Was the change in accounting standard favourable to the financial reporting of AirAsia? From IAS 17 Leases to IFRS 16 Leases", , Vol. 18 No. 6, pp. 995-1015. https://doi.org/10.1108/TCJ-02-2022-0040