FASB/IASB to Re-expose Lease Accounting Proposal
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) announced they will re-expose the revised proposal on lease accounting. The boards have made substantial changes to the original exposure draft released in August 2010 after receiving extensive feedback on the lease proposal. The boards plan to finish their deliberations during the third quarter of this year and re-expose the revised proposal soon after.
Leslie F Seidman, Chairman of the FASB, said: “During our discussions of the extensive comments we received on the exposure draft, the boards have reaffirmed the major change to lease accounting, which is to report lease obligations and the related right-to-use on the balance sheet. However, the boards decided to make many other changes to address the comments made by stakeholders. The boards decided that, while we still have other matters to discuss, stakeholders would appreciate the opportunity to comment on the revised package of conclusions.”
Tentative decisions reached at the meetings on July 20 and 21 included changes in reporting by lessors. The original exposure draft offered two types of reporting for lessors, the performance obligation approach and the derecognition approach. The boards tentatively decided lessors should use one type of accounting approach, the “receivable and residual” approach. It was also tentatively decided that leases of investment property measured at fair value and short-term leases (less than 12 months) would be excluded from the “receivable and residual” accounting approach.
The proposed accounting approach would allow lessors to recognize revenue at the beginning of the contract if it is reasonable that the lease will be profitable, otherwise revenue would be recognized over the lease term.
Stay tuned to Gray Matter for updates on the lease project when the proposal is re-exposed later this year.
For more information on the status of the project, please read the following: