Accounting Treatments of Leases under IFRS-16 and its Impact on Financial Solvency and Segment Reporting Transparency: An Applied Research at Mansour Investment Bank

This research aims to examine the accounting treatments of lease contracts under the International Financial Reporting Standard (IFRS-16) and analyze their impact on financial solvency and segment reporting transparency, at Mansour Investment Bank, with a real-world implementation. The research discusses the major changes brought about by the new standard, particularly the requirement that entities recognize nearly all lease contracts on the statement of financial position by recognizing a right-of-use asset and a lease, as well as the removal of the distinction between operating and finance leases. Besides utilizing a practical method to analyze the financial data of the bank before and after the adoption of the standard, the research also uses a descriptive-analytical method to analyze the theoretical basis of the standard. The results of the study show that IFRS-16 increased assets and liabilities on the balance sheet, which affects the financial solvency indicators as some capital adequacy ratios decrease and debt ratios increase. However, because it reduces off-balance-sheet treatments and increases disclosure, the standard increases the transparency of segment financial reports. The study indicates that IFRS-16 is a step forward in the right direction in terms of improving the quality and reliability of financial data, but banks will have to upgrade their accounting and control systems and train their employees to ensure its proper application and achieve the balance between their reported obligation.