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Leases – Education session

Date recorded:

Education session on the way forward for lessor accounting model(s)

The Boards discussed how to best approach lessor accounting. The staff presented the comments received on the proposed accounting models. Many constituents noted that the lessor accounting models proposed in the ED are less developed than the lessee accounting model. Some constituents have urged the Boards to perform additional field testing of the new proposals prior to finalising the leases guidance. The staffs presented the following three approaches on how to proceed with lessor accounting:

  1. Continue deliberating the proposed approach to lessor accounting in the Exposure Draft, revised to address constituents' concerns over aspects of the performance obligation and derecognition approaches as well as the guidance to distinguish when to use each of the approaches. Redeliberations would include both lessee and lessor issues towards the issuance of a final leases standard addressing both lessees and lessors.
  2. Retain the current guidance for lessors under Topic 840/IAS 17 (with perhaps some updates, which could be minor or may end up being substantial) and recognize that there will not be symmetry between lessees and lessors.
  3. Continue redeliberating both lessee and lessor accounting initially but limit the issues in lessor accounting to those that are critical to both lessees and lessors (for example, options to renew, contingent rent, definition of a lease, etc.). This will allow time to assess how the revenue recognition project, the FASB's investment property project, and the revised lessee model align with current US GAAP/IFRS lessor accounting. The Boards could then decide later in the current leases project whether changes to the present lessor accounting model are needed, and if so, whether these changes should be made as part of the current leases project or as part of a separate project.

The staff recommended the approach in (c). The Boards discussed each of these approaches and were in general agreement with a modified (c) approach whereby the Boards will continue redeliberating both lessee and lessor accounting but will not necessarily limit the issues in lessor accounting to those that are critical to both lessees and lessors. Rather, the Boards will consider the implications to the lessor accounting model of any decisions made relating to lessee accounting.

No decisions were taken during this session.

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