Abstract

Starting from January 1, 2019, a lessor adopting K－IFRS should recognize a lease of a leased property under lease or finance lease by applying a control model. In this study, we analyze how changes in accounting standards will affect the lease users’ financial statements and tax treatment, focusing on car rental transactions. As a result of the research, it is expected that the following effects will be observed when renting a medium－sized car (vehicle price 35,950,000 won) by distinguishing lease factor and non－lease factor and applying K－IFRS 1116. First, the debt ratio is expected to increase about 0.02% point for listed companies in the securities market and 0.04% point for the KOSDAQ market. second. If the interest cost of lease liabilities is denied due to permanent taxation, the ratio of tax adjusted amount to operating profit is 0.02% for the securities market and 0.08% for the KOSDAQ market. In this case, the debt ratio and the taxable interest expense increase proportionally depending on the lease scale. The lower the discount rate, the higher the debt ratio. The higher the discount rate, the higher the taxable interest expense. Given the number of vehicles rented by individual companies identified through interviews with industry experts, it is unlikely that the number of rental vehicles will be significantly affected. Also, considering the other potential lease transactions (eg office leases), the financial impact of the new standards will be substantial. In addition, due to the unclear nature of the new transactions and tax laws due to the shared economy, there will be few practical problems of companies applying K－IFRS No. 1116. This study differs from the previous studies in that it examines the effects of the newly introduced K－IFRS 1116 on the accounting and taxation of firms, focusing on the rental transactions of universal

Keywords

• K－IFRS 1116
• Car lease
• Right of use asset
• Lease liabilities
• Control model

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