Research On The Impact Of New CAS 21 On The Operating Lease Of Retail Enterprises

Leasing is a frequent method for businesses to gain the right to utilize an asset without having to pay a large upfront cost.Finance leases and operating leases were divided into two sorts under the former leasing standard,which was based on a risk-reward paradigm.There are certain distinctions in the accounting handling of different types of leases.Some businesses may use operating leases to obtain off-balance sheet financing and hide a portion of their liabilities,resulting in financial statements that do not accurately reflect their assets and liabilities,lowering the quality of accounting data.As the financial crisis spread across the globe,the flaws in the existing leasing standard became more apparent,drawing the attention of relevant authorities,and the IASB officially promulgated a new leasing standard,IFRS 16,in 2016.At the end of 2018,China followed international trends and issued New CAS 21.As a result,China has legally adopted the new lease criteria.The standard no longer employs the risk-reward model to classify leases specifically,but instead includes all leases in the statements other than exempted items,and this reform will have a significant impact on industries that rely heavily on operational leases,such as aviation,retail,and hotels.Retailers use an asset-light strategy in their operations,and a large percentage of the space they utilize for their operations,such as convenience stores,supermarkets,and warehouses,is acquired through operating leases.As a result,such businesses have a high share of right-to-use assets,and the new standard’s implementation will have a direct and considerable impact on their financial reporting.The new lease requirement will take effect on January 1,2021,for firms listed in China.As a result,this article uses a mix of case study and comparative analysis to restate the financial statements of a well-known retail organization,Yonghui Supermarket,based on the enterprise’s financial statement data from2018 to 2020.Quantitative analysis is used to analyze financial indicators before and after the adjustment of the standard in order to better understand the impact of the new lease standard on business financing and investment behavior.Following the implementation of the new leasing standard,it was discovered that the enterprise’s operating lease business was included in the balance sheet,resulting in a significant increase in the scale of assets and liabilities,resulting in a front-loading of expenses,resulting in the phenomenon of low profits in the early part of the enterprise and high profits in the later part of the enterprise,and the internal structure of the cash flow statement of the enterprise,the financial risk and credit risk of enterprises will increase,and the difficulty of financing will increase,and their investment behaviour will be affected to a certain extent.This paper concludes with a series of specific recommendations for enterprises in view of the adverse effects brought about by the new leasing standard,with a view to shedding light on the implementation of the new leasing standard for retail enterprises in China and reducing the impact of the standard changes on enterprises.