The impact on financial and tax areas of the Ecuadorian companies for the implementation of IFRS 16 Leases

Ecuador has implemented International Financial Reporting Standards since 2011 in the private sector. For this reason. the study of the application and implementation of international accounting standards is substantial in order to report the Financial Statements in private companies. Because of Accounting science is dynamic, it requires a continuous rules updating inside of companies. In this regard, the adoption of International Financial Reporting Standard number sixteen regulates the economic facts of operating leases from another perspective, conducting to financial and tax analysis. The changes shown have significant variations in the presentation of financial statements in companies, they emphasize the obligation to add operating leases in the balance sheets. The inclusion of operating leases on assets and liabilities of the entities brings about changes in the financial area, such as debt ratios, liquidity and profitability. In the tax, it has a unique effect which the study propose because it has been handled according to the provisions of the Ecuadorian tax law. The innovative application of operating leases makes expenditures presented in the results necessarily should be decreasing and nonlinear as companies did, thus some temporary differences appeared with the Ecuadorian tax administration. On behalf of, it becomes essential to have a tax reform in order to maintain a consistency between international accounting standard and Ecuadorian tax law.