Date recorded:

Lessor accounting: Hybrid model

The Board met for a short session to consider the criteria for application of the different models within the hybrid model. Several Board members suggested that the criteria should be based on the features of the lease, e.g. based on the dominant risk factors - derecognition model for contracts that are dominated by credit risk and performance obligation model for contracts with predominant asset risk (residual value, contingent rents, high level of services). Other Board members disagreed. They believed that those criteria would not work, for example, for the manufacturer/dealer issue due to the asset risk resulting from the residual value guarantee.

Another Board member supporting the hybrid model suggested that the performance obligation model should prevail, but the Board should extend the manufacturer/dealer leases as well as long term leases of land from the model (and apply the derecognition model).

No decision has been taken; the Board would continue its discussion on the issue at a following meeting. Some of the Board members were disappointed that the Board cannot conclude on a single model and expressed their concerns that the new model for lessors would be more complicated than current rules of IAS 17.

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