Question

Please list different stakeholders that can be impacted by lease reporting?How would these stakeholders be impacted financially or otherwise?

Answer 1

Stakeholders have been defined by Robert Edward Freeman is an American philosopher in his book Strategic Management: "A Stakeholder Approach as “any group or individual who can affect or is affected by the achievement of the firm’s objectives”.

Neither the investor nor the corporate partners know how a new standard will affect a new perspective or accounting perspective so it’s critical that the project team charged with handling the transition strategy have a clear plan for when and how to communicate the effects to corporate stakeholders.

Stakegolders can be classified as Primary and Secondary stakeholders.

• Primary Stakeholders

These are directly related to the company.. For example primary partners have interests directly related to the luck of the company. They typically include shareholders and investors, employees, customers, distributors, and residents of the communities in which the company operates.

• Secondary stakeholders

Secondary stakeholders have an indirect influence on an organization. They include the media and pressure groups, regulators, competitors, & others.

Stakeholder groups can also be differentiated as Inside stakeholders & Outside stakeholders

• How would these stakeholders be impacted financially or otherwise?

What’s clear is that the majority of stakeholders will need a great deal of assistance in truly understanding the impact of IFRS 16, specially in understanding the impact the changes will have on almost all critical performance metrics and financial ratios such as; current ratio, gearing ratio, interest cover, asset turnover, operating profit, net income, cash flow etc. Appropriate assessment of how these ratios and metrics will impact a company’s performance enables an entity to proactively plan and engage with the relevant stakeholders where appropriate.

It is also worth considering if your organisation anticipates the need to educate stakeholders on key performance indicators under both the current accounting standard, IAS 17, and under the new standard IFRS 16 when determining the overall impact of the transition. Ultimately, this is something a transition / project team should consider when defining what needs to be communicated to stakeholders.

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