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Accounting for Leases FASB / IASB Joint Project Update

Accounting for Leases FASB / IASB Joint Project Update. Private Company Financial Reporting Committee September 2008. ACTIVITY IN LAST 12 MONTHS. 10/2007 – FASB & IASB met separately 7/2008 – FASB & IASB met separately. TENTATIVE DECISIONS. Scope (7/2008)

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Accounting for Leases FASB / IASB Joint Project Update

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  1. Accounting for LeasesFASB / IASB Joint ProjectUpdate Private Company Financial Reporting Committee September 2008

  2. ACTIVITY IN LAST 12 MONTHS • 10/2007 – FASB & IASB met separately • 7/2008 – FASB & IASB met separately

  3. TENTATIVE DECISIONS • Scope (7/2008) • Lessor project deferred several years • Continue current accounting for several years • Lessee project to be completed by 2011 • Apply finance lease model (IAS 17) to all leases

  4. TENTATIVE DECISIONS, cont’d • Options to Extend or Terminate (7/2008) • Not separate assets • Include in best estimate of lease term

  5. TENTATIVE DECISIONS, cont’d • Contingent Rentals (7/2008) • Include in best estimate of rentals payable • IASB = probability-weighted measurement • FASB = not probability-weighted measurement

  6. TENTATIVE DECISIONS, cont’d • Initial Measurement (7/2008) • Similar to current capital lease accounting • Asset for right to use leased item • Liability for payment obligations • Both measured @ PV of expected payments • Discount @ lessee’s incremental borrowing rate

  7. OTHER DISCUSSIONS • Subsequent Measurement (7/2008) • IASB decided to: • Amortize asset systematically • Apportion payments between liability & interest • FASB discussed, but did not decide to: • Use IASB’s approach, or • Recognize straight-line rent expense

  8. OTHER DISCUSSIONS, cont’d • Lease Classification (7/2008) • IASB removed existing classifications • FASB discussed, but did not decide to do so

  9. FUTURE PLANS • Preliminary Views to be published in 4Q08

  10. FOR MORE INFORMATION See Project Update on FASB’s website at: http://72.3.243.42/project/leases.shtml

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