CESR comments on EFRAG’s draft comment letter on the IASB/FASB’s Paper ‘Preliminary Views on Leases’
15 July 2009
CESR urges the IASB and the FASB to consider carefully the practical implications and the disclosures which will be required by the new standard on leases to maintain an appropriate level of information in the notes to the financial statements.
CESR is generally supportive of the comments EFRAG has made in its response to the DP on "Leases" and is pleased to provide you with some comments. CESR appreciates the efforts of the IASB and the FASB to develop a common standard on lease accounting with a view to ensuring that assets and liabilities arising from lease contracts are properly recognized in the statement of financial position.
CESR would support a “right-of-use” approach for all leases leading to the recognition of an asset representing the right to use a leased item for the lease term, and of a liability for its obligation to pay rentals as long as a complimentary approach is expected for lessors. However, CESR wonders whether including short-term and small value leases within the scope of any proposals would pass a cost/benefit test.
Although CESR is supportive of the broad direction of a pragmatic single asset and liability approach, this will require lessees to apply judgment and make estimates about the lease term, contingent rentals and residual value guarantees.
In addition, CESR thinks that it might be helpful to obtain opinions from preparers on whether their accounting systems are sufficiently robust to deal with a frequent reassessment and re-measurement process in relation to lease assets and liabilities.
CESR also supports EFRAG’s recommendation of a consistent approach being taken in measuring the uncertainty that arises from term options and contingent rental payments. We would however prefer a most likely outcome approach rather than a probability weighted estimate approach.
© CESR - Committee of European Securities Regulators
