The FASB and IASB jointly issued a revised leases exposure draft in May 2013 (the "revised ED"). The proposal would fundamentally change the accounting for lease transactions and have significant business implications.
The revised ED would retain the "right of use" concept proposed in the initial ED issued in 2010, and lessees would reflect virtually all leases on the balance sheet. Some lessors would derecognize the underlying leased asset and record a receivable and residual, but others will continue to include it on the balance sheet. The revised ED also proposes a number of other changes to existing recognition, measurement, presentation, and disclosure guidance.
The revised ED reflects a number of changes from the initial ED, including: (1) a dual model for lessees and lessors, (2) a higher threshold for including extension options when measuring lease assets and liabilities, (3) simplified treatment of many types of variable lease payments, and (4) new guidance for determining whether a contract contains a lease.
The revised ED would permit entities to apply a full retrospective approach or a modified retrospective approach upon transition. Preparers would need to apply the guidance to all leases existing as of the initial application date (e.g., the beginning of the earliest comparative period presented). There is no grandfathering.
A final standard is not expected before 2014 and an effective date is unlikely before 2017.
This Dataline puts together the pieces to the puzzle of understanding the proposed model for lease accounting
Also accompanying the Dataline is a supplement that provides illustrative examples of applying the proposed model.