We support the efforts of the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) (collectively the Boards) to improve the Standards on the accounting for leases. We agree with the proposed right-of-use model when it is applied to very simple lease arrangements that include a fixed term with fixed payments as we believe this will increase transparency of the economic effects of leasing arrangements to users of the financial statements.

However, we have significant concerns over the application of the right-of-use model when the arrangement includes other terms such as options and contingencies. We believe that significant changes and improvements must be made to the ED before it becomes a final Standard. If not, achieving the objectives of providing information that is relevant and gives a faithful representation of lease arrangements may be challenged. In addition, there could be significant implementation issues (which are likely to require further standard setting), significant diversity in accounting for lease arrangements, and considerable increases in the costs of accounting for lease arrangements without a proportionate increase in benefits.

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