Since the FASB and IASB's February meeting, the staff have been consulting with users, preparers, and auditors to hear their views on how a lessee should subsequently measure a right-of-use asset arising under a lease. The boards held an education session this week to discuss the results of this outreach. After debating the feedback, the boards instructed the staff to explore three different approaches for discussion at next month's meeting: (1) apply the approach proposed in the 2010 exposure draft to all leases, possibly with some exceptions, (2) require a straight-line total expense recognition for all leases, and (3) a combination of the first two approaches. This In brief article provides an overview of the feedback the boards discussed at the education session and what's next for this project.
Since the FASB and IASB’s (the boards’) February meeting, the staff have been consulting with users, preparers, and auditors to hear their views on how a lessee should subsequently measure a right-of-use asset arising under a lease. The boards held an education session this week to discuss the results of this outreach. The key points were as follows:
After debating the feedback, the boards instructed the staff to explore three different approaches for discussion at next month’s meeting:
For the third option, the boards made a number of suggestions as to when each approach should be applied. These ranged from using the existing indicators in IAS 17 (retaining the distinction between operating and finance leases while recognizing assets and liabilities for both types on-balance sheet); using a new set of indicators based on a mirror image of IAS 17 (specifically identifying operating leases, with all other leases being finance leases); and differentiating leases based on the nature of the underlying asset (treating equipment and real estate differently).
The boards aim to make tentative decisions about which approach they prefer and consider the implications for lessor accounting at the June meeting. If this is achieved, the boards plan to discuss all outstanding issues in July, with the goal of publishing a revised exposure draft by the end of 2012.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Leasing team in the National Professional Services Group (1-973-236-7805).
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