At their October 2009 joint meeting, the boards tentatively decided to exclude from the scope of the proposed new leases requirements contracts that represent the purchase or sale of the underlying asset. At this meeting, the boards discussed the situation when a contract is the purchase or sale of the underlying asset.
The boards decided tentatively that:
- Contracts that transfer control of the underlying asset should be excluded from the scope of the proposed new leases requirements.
- The proposed new leases requirements should provide indicators to help a reporting entity determine whether control has been transferred.
- Management of the reporting entity should exercise judgement and consider all relevant facts and circumstances when determining whether control of the underlying asset has been transferred.
- Situations in which control of the underlying asset has normally been transferred include:
a. Contracts where the title to the underlying asset automatically transfers
b. Contracts that include a bargain purchase option.
The boards instructed the staff to provide additional analysis on the definition of control, how control would be assessed, and other possible indicators of control in the context of a lease contract.