In brief: Lease accounting redeliberations come to an end, but alternative views are on the horizon (No. 2012-26)
In brief
At their July 17 joint meeting, the FASB and IASB (the boards) completed their redeliberations of the leases project and instructed their staff to begin drafting the revised exposure draft. The boards expect to issue the revised exposure draft by the end of November 2012 with a 120-day comment period. The difficulties encountered during the 18-month-long redeliberation process were highlighted when the board members were asked whether they planned to present an alternative view to the revised proposals. Some members of each board indicated that they may present alternative views. This In brief article highlights some of their concerns.
What's new?
At their July 17, 2012 joint meeting, the FASB and IASB (the boards) completed their redeliberations of the leases project and instructed their staff to begin drafting the revised exposure draft. The boards expect to issue the revised exposure draft by the end of November 2012 with a 120-day comment period.
However, the difficulties encountered during the 18-month-long redeliberation process were highlighted when the board members were asked whether they planned to present an alternative view to the revised proposals.
Three of the seven FASB members stated they may present alternative views. These board members have significant concerns about whether some of the core objectives of the project are met in the revised proposal. Other specific concerns include the accounting for variable leases payments, whether the proposed disclosures will provide useful information to financial statement users, and the interaction of lessor accounting with the proposed revenue recognition model.
In contrast, IASB members contemplating presenting an alternative view primarily expressed concern about the conceptual merits of a dual, rather than single, lease accounting approach being applied by both lessees and lessors.
At the meeting, the boards also discussed the presentation and disclosure implications of the dual lease accounting approach. Refer to In brief 2012-15, A dual model for lease accounting: redrawing the lines, for more information about this approach.
What's next
The FASB plans to meet again in August 2012 to address whether to provide any practical expedients to the revised exposure draft for private companies. The FASB and IASB are also expected to meet prior to release of the revised exposure draft to discuss any issues that might arise during the drafting process.
Questions?
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).
Authored by:
Tom Wilkin
Partner
Phone: 1-973-236-4251
Email: tom.wilkin@us.pwc.com
David Humphreys
Partner
Phone: 1-973-236-4023
Email: david.humphreys@us.pwc.com
Krystyna Niemiec
Senior Manager
Phone: 1-973-236-5574
Email: krystyna.m.niemiec@us.pwc.com
In brief is designed to provide a timely, high-level overview of significant financial reporting developments. It is issued by the National Professional Services Group of PricewaterhouseCoopers LLP. This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this material was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees and agents shall not be responsible for any loss sustained by any person or entity who relies on this publication.