The accounting under existing requirements depends on the classification of a lease. Classification as an operating lease results in the lessee not recording any assets or liabilities in the statement of financial position (balance sheet) under either International Financial Reporting Standards or US standards (generally accepted accounting principles). This results in many investors having to adjust the financial statements (using disclosures and other available information) to estimate the effects of lessees' operating leases for the purpose of investment analysis.
The proposals would result in a consistent approach to lease accounting for both lessees and lessors–a right-of-use' approach. Among other changes, this approach would result in the liability for payments arising under the lease contract and the right to use the underlying asset being included in the lessee's statement of financial position, thus providing more complete and useful information to investors and other users of financial statements.
ED/2010/9 is open for comment until 15 December 2010. Click for:
As part of their additional outreach, the boards are seeking entities that would be willing to take part, on a confidential basis, in field work to discuss and test the provisions of their proposals for lease accounting. The purpose of the field work is to assess the operationality and the costs and benefits of the proposed new standard. More Information is available in the IASB press release.