Leases — Boards Make Additional Decisions About Transition and Scope

Published on: 21 Feb 2013

At their joint meeting yesterday, the FASB and IASB discussed transition requirements under the proposed leases model and tentatively decided that lessees and lessors that currently account for a lease as a capital/finance lease would continue to apply existing guidance (i.e., ASC 8401 or IAS 172) for recognition and measurement purposes. After adopting the guidance in the proposed model, a lessee would reclassify any assets currently recorded to reflect those assets as right-of-use assets. A lessor would also reclassify the amounts recorded for leases currently classified as capital/finance leases in accordance with the proposed presentation requirements. However, lease agreements that are modified after the adoption of the proposed guidance would no longer qualify for grandfathering under the current recognition and measurement requirements. In addition, the FASB reconfirmed its previous decision that there would be no transition relief for leases that are currently accounted for as leveraged leases.

At another recent meeting, the FASB decided that entities would need to assess arrangements to license internal-use software from third parties to determine whether they are required to account for such arrangements as a lease under the proposed guidance.


[1] FASB Accounting Standards Codification Topic 840, Leases.

[2] IAS 17, Leases.

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