New lease-reporting standard will ‘significantly’ impact Xiabuxiabu results
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Chinese restaurant operator Xiabuxiabu says the impact of the new International Financial Reporting Standard 16 (IFRS 16), which changes the way leases are treated in financials, will seriously impact its profit this year.
The Hong Kong-listed company issued a profit warning yesterday saying profit attributable to shareholders for the six months to June would decrease “significantly” compared with last year.
“The application of IFRS 16 will result in a higher total charge to the statement of profit or loss in the first few years of the lease, and such expenses will decrease during the latter part of the lease term, therefore there is no impact on the expenses recognized during the lease term. As the group currently operates a large restaurant network with more than 1000 restaurants, the effects of the application of IFRS 16 will be significant,” said chairman H O Kuang-Chi.
“As the results for the six months … have not been finalized, the information contained in this announcement is only a preliminary assessment by the board based on information currently available including the unaudited consolidated management accounts.”
Xiabuxiabu will release its interim results by the end of this month.
Questions & Answers
Q.What specifically is causing the reported impact on Xiabuxiabu's profit?
What specifically is causing the reported impact on Xiabuxiabu's profit?
The new International Financial Reporting Standard 16 (IFRS 16) changes how leases are accounted for, leading to higher charges to the profit or loss statement in the initial years of a lease.
Q.Will this change affect the total expenses recognised by Xiabuxiabu over the full lease term?
Will this change affect the total expenses recognised by Xiabuxiabu over the full lease term?
No, there will be no impact on the total expenses recognised over the entire lease term. The change only affects when those expenses are reported.
Q.Why is the effect of IFRS 16 particularly significant for Xiabuxiabu?
Why is the effect of IFRS 16 particularly significant for Xiabuxiabu?
The impact is significant because the group operates a large network of more than 1000 restaurants, meaning they have many leases affected by the new standard.
Q.Is the reported profit warning based on final, audited figures?
Is the reported profit warning based on final, audited figures?
No, the information is a preliminary assessment by the board, based on currently available information including unaudited consolidated management accounts.
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