GOOD leases-newsletter-2015-17

GOOD leases-newsletter-2015-17 - IFRS NEWSLETTER Issue 17...

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© 2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. IFRS NEWSLETTER LEASES Issue 17, March 2015 After almost ten years of joint work the IASB and the FASB have decided to ballot different lease accounting proposals.  Kimber Bascom, KPMG’s global IFRS leasing standards leader PERMISSION TO BALLOT This edition of IFRS Newsletter: Leases provides an overview of the IASB and FASB discussions of the leases project between November 2014 and March 2015. The IASB and the FASB (the Boards) have decided to prepare non-converged ballot drafts of their new standards on lease accounting. This is an important step in the process, and is further proof of the Boards’ determination to proceed with different lease accounting models. In their latest project meetings, the Boards also decided to retain the key elements of their proposed definition of a lease. This will disappoint constituents who were keen to explore alternative approaches. However, the Boards have agreed additional reliefs, including the details of an exemption for ‘small-ticket’ leases under IFRS and a new transition relief related to the definition of a lease. The Boards expect to issue their respective new standards by the end of 2015 but have not yet discussed an effective date. Highlights l     Definition of a lease – The Boards agreed on a fully converged definition of a lease. l     Small-ticket leases – The IASB confirmed that it will include a ‘small-ticket’ exemption in the new standard, an exemption that the FASB has rejected. l     Transition: Definition of a lease – The Boards will permit, but not require, ‘grandfathering’ of the definition of a lease on transition. l     Lessee disclosure requirements – The Boards agreed on the overall disclosure objective, but disagreed on the detailed qualitative and quantitative information that a lessee would be required to disclose.
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CURRENT STATUS OF THE PROPOSALS The 2013 proposals … The Boards have been working towards a converged standard that would bring most leases on-balance sheet for lessees. This joint project was intended to replace the current lease accounting requirements under IFRS and US GAAP. In addition, there would be significant consequential amendments to IAS 40 Investment Property . In May 2013, the Boards published a revised exposure draft (the 2013 ED), which updated the proposals published in the 2010 exposure draft. The 2013 ED contains the following key proposals, all of which have been redeliberated by the Boards in 2014 and 2015. Lease identification A ‘lease’ would be a contract that conveys the right to use an identified asset for a period of time in exchange for consideration. The identification criteria would be based on rights to control the use of identified assets. A contract would convey these rights if the customer could both direct the use of the asset and derive substantially all of the benefits from its use. If a single contract contains multiple lease and/or non-lease components, then the company would generally be required to account separately for each component.
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