The boards discussed:
- reconfirmation of the right-of-use approach for lessees
- in-substance purchases/sales
- lessor accounting models
- timing of initial recognition.
The boards tentatively reconfirmed the right-of-use approach for lessees. That approach, as described in the Discussion Paper Leases: Preliminary Views proposes that a lessee should recognise for all leases:
- an asset representing its right to use the leased item for the lease term (the right-of-use asset)
- a liability for its obligation to pay rentals.
The boards discussed whether the scope of a leases standard should include a contract that represents the purchase (lessee) or sale (lessor) of the subject item. The boards tentatively decided to exclude such contracts from the scope of the leases standard. The boards directed the staff to develop criteria for an entity to use to determine whether an arrangement is the purchase or sale of an asset and is not a lease.
The boards considered the following models for how a lessor would apply a right-of-use approach:
- derecognition approach
- performance obligation approach
- operating lease approach
- dual model approach (derecognition and performance obligation).
The boards tentatively decided to adopt the performance obligation approach to lessor accounting. Under that approach, a lessor would:
- recognise an asset representing its right to receive rental payments (a lease receivable)
- recognise a liability representing its performance obligation under the lease-that is, its obligation to permit the lessee to use one of its assets (the leased item). The lessor would recognise revenue as that performance obligation is satisfied over the lease term. That means that a lessor would not recognise revenue at the inception of a lease contract.
The boards discussed whether an entity should recognise any assets or liabilities during the period between the signing of a lease contract and delivery of the leased item to the lessee. The boards tentatively decided that:
- assets and liabilities arise when a contract is signed.
- between contract signing and delivery, the unit of account is the contract as a whole and the contract position would be presented net in the statement of financial position of both the lessee and lessor.
- an entity would initially and subsequently measure the net contract asset or liability on a cost basis, subject to impairment (generally initial measurement of the contract asset would equal the initial measurement of the contract liability).
- an entity would provide disclosures about the assets and liabilities that arose upon contract signing.
In November, the boards will continue its discussion of lessee and lessor accounting issues.