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Leases

IASB meeting summaries and observer notes


 IASB / FASB May 2010


 

 

The boards discussed:

  • Lessor accounting for the performance obligation
  • Derecognition approach to lessor accounting.

Lessor accounting for the performance obligation

The boards tentatively decided that under a performance obligation approach to lessor accounting, the lessor has a single performance obligation to continue to permit the lessee to use the leased asset over the lease term. That performance obligation would be satisfied, and revenue recognized, continuously over the lease term.

Derecognition approach to lessor accounting

The boards discussed an alternative approach to lessor accounting, the derecognition approach. The boards then discussed two possible models � a full derecognition and a partial derecognition approach.

If the boards adopt a derecognition approach to lessor accounting , the boards tentatively decided to adopt a partial derecognition approach. Under that approach, the boards discussed:

  • Accounting for residual assets
  • Accounting for options.

Accounting for residual assets

The boards tentatively decided that the residual asset would be an allocation of the previous carrying amount of the underlying asset. The residual asset would not be remeasured unless for impairment.

Accounting for options

The boards tentatively decided that initial measurement of the residual asset recognised by the lessor would be based on the assessed lease term, ie the longest possible lease term that is more likely than not to occur.

19 May 2010 IASB/FASB Joint Board Meeting

The boards continued discussing a partial derecognition approach. Under that approach, the boards discussed:

  • Accounting for options
  • Accounting for contingent rentals and residual value guarantees
  • Accounting for subleases
  • Presentation
  • Disclosures.

Accounting for options

The boards tentatively decided that accounting for a reassessment of the expected lease term would be treated as a new derecognition/re-recognition event. That is, the lessor would derecognise/reinstate a portion of its residual asset.

The boards asked the staff to provide additional analysis on accounting for p urchase options under lessee and lessor accounting.

Accounting for contingent rentals and residual value guarantees

The boards tentatively decided that changes in amounts receivable under all types of contingent rentals and residual value guarantees would be recognised in profit or loss.

Accounting for subleases

The boards tentatively decided that different measurement guidance would not be provided for assets and liabilities arising under a sublease. Also, intermediate lessors would present all assets and liabilities arising under a sublease gross in the statement of financial position.

Presentation

The boards tentatively decided that a lessor would present:

  • lease receivables separately from other receivables in the statement of financial position
  • residual assets separately with property, plant and equipment in the statement of financial position with disclosures by class of assets
  • revenue and cost of sales based on the lessor�s business model, that is some lessors would present gross and other lessors would present net in the statement of comprehensive income.

Disclosures

The boards tentatively agreed to a set of disclosure requirements for lessors under the derecognition approach including the followings:

  • additional disclosures about the residual asset
  • additional disclosures about the service obligations.

The boards instructed to the staff to consider the disclosure requirements in the Derecognition project.

The FASB expressed a preference for the performance obligation approach for lessors. The IASB expressed a preference for a hybrid model which the lessor would apply the derecognition approach for some leases and the performance obligation approach for others. The IASB instructed the staff to develop proposals for deciding when to apply which model.

The boards will continue discussing lease accounting at the joint meeting in June.

 

Date: 5/18/2010