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We comment on the joint leases ED

  • Deloitte Comment Letter Image

Sep 13, 2013

We have published our comment letter on the joint FASB-IASB exposure draft on leases. We believe that conceptually the right-of-use (ROU) asset approach appropriately depicts the rights and obligations for lessees and should serve as the foundation for changes to the recognition and measurement requirements in the current lease standards. However, we have significant concerns with the approach currently included in the proposal.

The concerns described in the comment letter include:

  • The conceptual merit of the Type B lessee approach — specifically, that it would result in an increasing amount of amortization over the lease term. The proposed dual-model approach may also be more costly and complex for preparers than existing standards, and may not result in sufficiently improved information for users.
  • The combination of the proposed measurement requirements for the lease liability and proposed disclosures may not provide financial statement users with sufficient information about a lessee’s future lease payments.
  • The boards have not yet sufficiently developed the ROU model for lessors and have not made a compelling case that the information provided by the proposed lessor accounting model represents a significant improvement over the existing lessor accounting model.

The comment letter also questions whether the cost-benefit analysis of introducing this new model continues to support the case for change at this stage of the development of the ROU concept and proposes an alternative approach.

Click for the full comment letter.

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