Accounting for LeasesFASB / IASB Joint Project
Private Company Financial Reporting Committee
September 2007
BACKGROUND
• FAS 13 issued November 1976
• Existing interpretive pronouncements:6 FINs10 FTBs13 EITFs1 FSPAICPA guidanceSEC guidance
• 6/2004 – FASB/IASB: “take a fresh look”
BACKGROUND, cont’d
• 4/2006 – FASB/IASB discuss jointly• 7/2006 – Project added to agendas• 12/2006 – Joint Working Group formed• 2/2007 – Joint Working Group met• 3/2007 – FASB & IASB met separately• 4/2007 – FASB/IASB met jointly re: scope• 5/2007 – IASB met re: lease options• 6/2007 – FASB & IASB met separately
TENTATIVE DECISIONS
• Right-of-Use Model (3/2007)Lessee accounting:
• Asset for right to use leased item• Liability for payment obligations• No liability for obligation to return item
Lessor accounting:• Asset for right to receive payments• Asset for end-of-term residual value• No liability for obligation to permit use of item
TENTATIVE DECISIONS, cont’d
• Scope (4/2007)Focus on arrangements in current literatureConveyances of right to use another’s asset
to be considered prior to issuance of PV
TENTATIVE DECISIONS, cont’d
• Measurement Approaches (6/2007)Lessee’s right-of-use asset alternatives:
• Intangible asset• Nature of the leased item (IASB prefers)• Separate model (FASB prefers)
Lessee’s liability for payments alternatives:• Fair value• Effective interest method, with FVO
Staff to further develop approaches
OTHER DISCUSSIONS
• Lease Option Alternatives (5/2007)Right to use to exercise date + option to
extendRight to use for period including extensions +
option to terminate“Most probable lease term” approach (options
not separated)Expected value of payments (options not
separated)
OTHER DISCUSSIONS, cont’d
• Recognition Alternatives (6/2007)Upon signing of lease contractUpon delivery of leased item
FUTURE PLANS
• FASB/IASB to meet jointly in 9/2007
• Preliminary Views to be published in 2008
FOR MORE INFORMATION
See Project Update on FASB’s website at:
http://72.3.243.42/project/leases.shtml
