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IASB and FASB consult a common standard on lease accounting to ensure that the assets and liabilities arising from lease contracts are recognised in the statement of financial position.
The discussion paper sets out their preliminary views on accounting for leases by lessees and describes some of the issues that they will need to resolve in developing a new standard on lessor accounting. The objective of the discussion paper is to explain the issues and to solicit comments early on in the process.
The different accounting treatment of finance and operating leases has given rise to various problems. In particular, users complain that financial statements do not depict clearly the effects of operating leases. Similar transactions can be accounted for very differently.
The standards provide opportunities to structure transactions so as to achieve a particular lease classification.
A new standard on lessee accounting could affect any entity that leases items as a lessee. The Boards propose that lease accounting should be based on the principle that all leases give rise to liabilities for future rental payments and assets that should be recognised in an entity’s statement of financial position. This approach is aimed at ensuring that leases are accounted for consistently across sectors and industries.
The boards have not yet discussed the method of transition or the effective date.
The publication of an exposure draft is planned for 2010.
Deadline for comments is 17 July 2009.