This session was held jointly with the FASB.
The boards discussed:
- How to account for leases that include contingent rental arrangements and residual value guarantees
- The scope of the proposed new requirements for leases.
The boards tentatively decided that:
- The obligation to pay rentals recognised by the lessee, and the receivable recognised by the lessor, would include amounts payable under contingent rental arrangements.
- A lessor would only recognise a receivable for amounts due under contingent rental arrangements if the receivable could be measured reliably, which is consistent with the boards' tentative decisions on revenue recognition.
- The obligation/receivable would be measured using an expected outcome technique. The final requirements would clarify that not every possible scenario would need to be taken into account when measuring the obligation/receivable.
- Contingent rentals based on an index or rate would be measured using readily-available forward rates. If forward rates are not available, the rates at the inception of the lease would be used.
- The carrying amount of the obligation/receivable would be reassessed at each reporting date if any new facts or circumstances indicate that there is a material change in the obligation.
The boards instructed the staff to provide additional analysis on how to account for changes in the obligation/receivable arising from reassessments of the amounts payable under contingent rental arrangements.
The boards also tentatively decided that lessees should account for residual value guarantees in the same way as for contingent rental arrangements.
The boards tentatively decided to exclude the following from the scope of the proposed new requirements:
- Leases of intangible assets
- Leases to explore for or use natural resources, such as minerals, oil and natural gas
- Leases of biological assets.
The boards tentatively decided not to provide a scope exclusion for leases of non-core assets.
The boards discussed whether to provide a scope exclusion for short-term leases and instructed the staff to provide additional analysis on this issue.
The boards will continue their discussion of this project on 5 January at an additional meeting.