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IFRS in Focus — IASB issues exposure draft on lease accounting

Published on: Aug 29, 2010

On August 17, 2010, the IASB and FASB published a joint exposure draft ED/2010/9 Leases.

The ED would eliminate the distinction between operating leases and finance leases and would introduce new accounting models for lessees and lessors. Lessees would no longer be permitted to treat leases as “off-balance sheet” financings but instead would be required to recognize an asset and liability for all leases within the scope of the proposals.

The boards have been discussing lease accounting since 2006 when the project was added to the Memorandum of Understanding. Many believe that current lease accounting is too reliant on bright lines and subjective judgments that result in economically similar transaction being accounted for differently. The boards published a discussion paper in March 2009 which focused on the lessee accounting and have since decided to address both lessee and lessor accounting.

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