The IASB and the FASB discussed lessee accounting, and whether there should be different lease expense recognition patterns for different leases. The boards tentatively decided that a lessee should account for:
- some leases using an approach similar to that proposed in the 2010 Leases exposure draft; and
- some leases using an approach that results in a straight-line lease expense (straight-line approach).
Twelve IASB members and six FASB members agreed.
The boards also tentatively decided that a lessee should distinguish between these two different types of lease on the basis of whether the lessee acquires and consumes more than an insignificant portion of the underlying asset over the lease term. That principle should be applied by using a practical expedient based on the nature of the underlying asset as follows:
- Leases of property (land or a building—or part of a building—or both) should be accounted for using the straight-line approach, unless:
- the lease term is for the major part of the economic life of the underlying asset; or
- the present value of fixed lease payments accounts for substantially all of the fair value of the underlying asset.
- Leases of assets other than property should be accounted for using an approach similar to that proposed in the 2010 Leases exposure draft, unless:
- the lease term is an insignificant portion of the economic life of the underlying asset; or
- the present value of the fixed lease payments is insignificant relative to the fair value of the underlying asset.
All FASB and IASB members agreed.
The boards discussed lessor accounting, and tentatively decided to change the tentative decisions on the lessor accounting model that is used to determine when the receivable and residual approach would apply. All FASB members and 12 IASB members agreed to change the tentative decisions.
The boards tentatively decided that a lessor should distinguish between leases to which the receivable and residual approach applies and leases to which an approach similar to operating lease accounting applies. The distinction would be made by using the same criteria as noted above for lessee accounting. Consequently, a lessor would apply the receivable and residual approach to leases for which the lessee acquires and consumes more than an insignificant portion of the underlying asset over the lease term. Four FASB members and eleven IASB members agreed.
IASB Only session
At their joint session, the IASB and FASB discussed three approaches for determining how much premium would be recognised in each accounting period, focusing on an earned premium approach. At this session, the IASB considered the implications of those approaches for the presentation of acquisition costs expenses and related premium. In particular, the IASB discussed whether an insurer would recognise those expenses and the related premium when the insurer incurs those acquisition costs or whether it would recognise them over the life of the contract. The purpose of the discussion was to explore the best form of presentation, not to change the measurement of the insurance contracts liability or to change the profit that the insurer would report. No decisions were made at this meeting.