Leases (IASB/FASB)

Date recorded:

The IASB project manager introduced the papers to be discussed by the joint Board meeting session: Paper 3A provides a high level summary of feedback received on the 2013 ED at outreach meetings and in comment letters and paper 3B describes the staff views on the main topics for redeliberation.

The comments in paper 3A were discussed following the structure set in the paper (lessee model, lessor model, definition of lease, scope, measurement etc.) The project manager mentioned that there were a lot of comments received, including diverse views on each particular topic and there is a need to analyse those comments in more detail and see how they interact.

The project manager also provided a brief overview of the outreach process which included conversations with constituents to understand the feedback received. In general there is broad support for the lessee model while there is less support for changing the lessor model.

During the session, FASB Project managers discussed the comments in paper 3A related to definition of a lease, measurement, transition, and paper 3B steps for redeliberation.


Comments raised by IASB Board members:

One Board member expressed having a sense that there are mixed views but there is general support for the assets and liabilities (right-of-use) model. He participated in many outreach activities and suggested that there are further steps necessary to be taken in order to understand the interrelation of the comments received.

One Board member agreed that changes are needed, he expressed concerns that there are diverse views even in users from similar industries and considers that it is important to find solutions and provide alternatives to address concerns, primarily those related to complexity and costs.

Several Board members expressed concern about the lack of support for changing the lessor model and expressed that it is necessary to understand the rationale for these objections. It was also mentioned that it is necessary to (i) align the lessor model with the revenue recognition standard; and (ii) to provide for a solution in situations where an entity is both a lessor and a lessee.

As regards paper 3B, several Board members mentioned that they prefer to start with the lessee model and then move to the lessor model.

There was also agreement between IASB Board members that there is no need to request additional information from users and they will continue working with the information obtained from the outreach activities and comment letters.


Comments raised by FASB Board members:

One Board member requested the staff to provide more information in order to understand the mixed views raised, for instance to include classification by industry, user etc.

Another Board member expressed that careful consideration is needed for redeliberation; he noted that many comments were received related to costs and complexity although  he believes that there is no need to request users to provide additional feedback since it is very difficult to prepare accurate estimates of implementation costs.

Several Board members stated that in their view it is not critical to align the lessee and the lessor model because they relate to different business models. They also expressed that there are no issues with the current lessor model.

FASB Board members agreed with comments from IASB board members as regards the need to align the lessor model with the revenue recognition standards.

In addition, they agreed with the sequence and timeline defined in paper 3B while stating that they prefer to start with the lessor model and then move to the lessee model.

Next steps

There was agreement from IASB and FASB Board members to go ahead with the redeliberation plan as included in paper 3B. It should be noted that Paper 3B provides the recommended sequencing from the staff and grouping for redeliberation; however, there is no specific timeline and deadlines set in the paper. It was also agreed that no further information will be required from users and they will work with the feedback already received. Finally, the staff was instructed to decide the best way to move forward as regards the details for sequencing and grouping the redeliberation topics.

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