Deloitte global press release on IASB and FASB proposals to overhaul lease accounting

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18 Aug 2010

Deloitte has published a global press release on the IASB and FASB proposals to overhaul lease accounting. The IASB and FASB proposals would creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases.

Excerpts from the press release:

"As leasing is such a common transaction, this proposal would, no doubt, affect companies around the globe and across all industries," said Joel Osnoss, Global IFRS Leader, Clients & Markets, Deloitte Touche Tohmatsu Limited.

"Many of the proposed requirements could prove time-consuming to adopt, which makes a well-thought-out work plan critical to a smooth transition to the new accounting rules. Companies that use leasing should start thinking today about how this proposal could affect their financial statements, and should consider the need to make changes to lease structuring, performance metrics, debt covenants, and systems. Education of key stakeholders will also be necessary."

The IASB has stated that the comment period will end on 15 December 2010, with the final standard due for publication in June 2011. The effective date of the new leasing standard is still uncertain. The proposed transition requirements would not grandfather any existing leases. Therefore, lessors and lessees that enter into longer-term leases will need to consider the potential affect of the proposed rules on existing leases.

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