The boards discussed:
- Transitional provisions for the proposed new requirements for lessees
- The definition of the interest rate implicit in the lease.
Transitional provisions for the proposed new requirements for lessees
At their meetings in June 2009, the boards tentatively decided to require the lessee to recognise and measure the obligation to pay rentals and the right-of-use asset in respect of all outstanding leases as of the date of initial application of the proposed new leases requirements.
The obligation to pay rentals should be measured at the present value of the remaining lease payments, discounted using the lessee�s incremental borrowing rate on the transition date. The right-of-use asset should be measured on the same basis as the liability, subject to any adjustments required to reflect impairment.
At this meeting, the boards tentatively decided that:
- Lessees should apply the proposed transition requirements to leases currently accounted for as finance/capital leases except simple finance/capital leases.
- For simple finance/capital leases that do not have options, contingent rentals and/or residual value guarantees, the measurement of the assets and liabilities held under would not be changed on transition or subsequently.
- For IFRS preparers, the revalued amount of property, plant and equipment can be carried forward as the carrying amount of a right-of-use asset for simple finance/capital leases.
- Additional adjustments for prepaid or accrued rentals should be made when lease payments are uneven over the lease term.
Definition of the interest rate implicit in the lease
The boards tentatively agreed that the rate the lessor uses to discount lease payments should be the rate that the lessor is charging the lessee. The boards also tentatively decided to include guidance in the proposed new leases requirements on how to apply that principle in different circumstances.
The boards will continue discussion of lessee and lessor accounting at the March 2010 meeting .