Leases: Lease Accounting Convergence Brings a New View |
The lease accounting rules as we currently know them are changing as a result of ongoing accounting convergence efforts between the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) (collectively, the “Boards”). As part of the Boards’ efforts to harmonize accounting standards, the IASB and the FASB are working on a joint project to overhaul the existing leasing accounting models in ASC 840, Leases, and IAS 17, Leases.
After close to a year of joint deliberations, the Boards issued an Exposure Draft, Leases, in August 2010, which would establish a new accounting model for both lessees and lessors, and change how leases are recorded in a company’s financial statements. At their joint meetings the week of July 18, 2011, the Boards confirmed they plan to reexpose the Exposure Draft in 2011. The proposed standard is now expected to be issued in mid to late 2012.
What’s Changing?
The proposed lease model is expected to impact companies across various industries and in a variety of ways, including:
- Many companies will likely face technical accounting challenges in applying the new accounting standard, as well as a likely need to address a number of process and technology issues.
- For lessees, the new approach would eliminate the operating lease accounting model and replace it with a “right-of-use” model, in which a lessee would recognize an asset representing its right to use a leased item during the lease term, as well as a liability for the lessee’s obligation to pay rentals.
- Lessors would either follow a derecognition model or a performance obligation model over the lease term, depending on their level of exposure to risks or benefits associated with the underlying asset during or after the lease term.
In Deloitte’s publication, Leases: Lease Accounting Convergence Brings a New View, we highlight some of the key implementation challenges that may lie ahead, and show how Deloitte can help companies evaluate – and ultimately implement – this new lease accounting guidance.
Download the PDF to learn more.
Leases: Lease Accounting Convergence Brings a New View
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