Practical guide

The FASB and IASB (the "boards") issued a revised Leases exposure draft (the revised ED) on 16 May 2013. The proposals, which continue to attract a diverse range of views among constituents, would fundamentally change the accounting for lease transactions and are likely to have significant business implications. Comments on the revised ED are requested by 13 September 2013.

The revised ED retains the previously proposed ¡¥right-of-use¡¦ concept and requirement for lessees to reflect all leases (except short-term leases) on the balance sheet. However, it represents a significant shift from the original ED (issued in 2010) in key areas. Perhaps the most significant is the proposal of a dual model for lease accounting and lessee expense recognition. It also proposes a higher threshold for including extension options when measuring lease assets and liabilities; a simplified treatment of many types of variable lease payments; and new guidance to determine whether a contract contains a lease.

The revised ED allows entities to apply a either a full retrospective approach or a modified retrospective approach for transition. Preparers will need to apply the guidance to all leases existing as of the beginning of the earliest comparative period presented (that is, no grandfathering).

Issuance of a final standard and determination of the effective date is unlikely before 2014.