Accounting & Auditing

Leases:  Midyear Decisions & Project Recap

August 2014

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) met again in June and July to continue redeliberating the May 2013 exposure draft (ED), Leases. Overall, the boards made considerable progress and converged on many topics.

Regarding lessors, the boards reached converged decisions on how intermediate lessors would present subleases in the balance sheet and income statement, but they reached different decisions about sublease classification. They also reached converged decisions on the majority of lessor disclosure requirements, resulting in more disclosures than currently required about how lessors manage risks related to residual values.

The boards discussed lessee balance sheet presentation and reached converged decisions on how lessees would present Type A right-of-use assets and lease liabilities in the balance sheet. Regarding cash flow presentation for lessors and lessees, the boards agreed that lessees’ presentation in the statement of cash flows would be consistent with what was proposed in the May 2013 ED. The boards agreed on many aspects of the accounting for sale and leaseback transactions. FASB tentatively agreed on circumstances that would preclude a sale and gain recognition; this was not addressed by IASB.


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