In the summer of 2010, the IASB issued an exposure draft that proposes a new accounting model for leases requiring that virtually all leases be accounted for as financing transactions. All lease obligations will be capitalized by the lessee as so-called ‘right-to-use’ assets. The consequences of the proposed lease accounting change is far reaching, and is likely to be the most profound accounting change in decades.
That the proposed lease accounting changes will have a significant impact on Canadian companies was confirmed in the PwC IFRS Survey: A market perspective: Insight into IFRS standards in Motion – High priority projects. Over 250 respondents from varied industries in Canada shared their thoughts on the high-priority IFRS projects (lease accounting, revenue recognition and financial instruments). Almost half of the respondents cited the IFRS changes to lease accounting as having a moderate to high impact on their organization.
The following publication discusses how the proposed changes may impact the real estate industry and what landlords should consider.