In August 2010, the FASB and IASB jointly issued an exposure draft of a proposed accounting standard for leases (the "ED"). The proposals would change the accounting for lease transactions and have significant business implications. The comment period ended on December 15, 2010 and the boards have begun redeliberating the ED.
The boards have considered the extensive feedback received that the ED was overly complex and, in some areas, inconsistent with the economics of the underlying transactions. The proposed changes address some of the specific concerns raised and should make implementation of the standard more operational and less costly and complex. Thus far, the boards have made tentative decisions to change the proposals in the ED with respect to the definition of lease term (threshold for inclusion of extension options) and inclusion of variable or uncertain cash flows (i.e., contingent rent), and have instructed the staff to conduct additional outreach with respect to their tentative decision concerning variable or uncertain cash flows. The boards are also considering changes in the definition of a lease, profit and loss recognition patterns and the lessor accounting model. However, no decisions in these areas have yet been reached and the staff will conduct additional outreach. This Dataline provides a summary of the overall status of the boards' redeliberations on lease accounting.