Lease Accounting Project – February 2015 Update
The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”),
collectively (“the Boards”) met separately in February 2015 and substantially concluded their redeliberations on the
proposed changes to lease accounting. The Boards came to different conclusions on a number of matters.
Regarding
lessee transition to the new accounting standard, the FASB decided that lessees would be required to utilize the
modified retrospective approach to transition with certain options for relief to be outlined specifically in the new
standard. The FASB would prohibit using the full retrospective transition approach.
The IASB decided that the
accounting for leases currently classified as finance leases would not change at the date of initial application of the
new standard. For leases previously classified as operating leases, the IASB decided to allow either a full
retrospective approach or a modified retrospective approach and provided specific guidance on how the modified
retrospective approach would be implemented.
The modified retrospective approach provides a method by which the
Lease Liability and Right of Use Asset are recorded on the balance sheet at the time of adoption and in comparative
periods in amounts approximating the results of a full retrospective approach. Any difference between the Right of
Use Asset and the Lease Liability as a result of the application of this approach is recorded in retained
earnings.
The IASB also decided to include a lessee recognition and measurement exemption for leases of small
assets. The definition of small assets is yet to be finalized but the IASB discussions have focused on an individual
asset threshold of $5,000.
As with all decisions made to date, the conclusions discussed above are tentative. The
Boards have instructed their staffs to begin drafting the new standard. An effective date for implementation has yet to
be set by the Boards. Final issuance of the new standard is expected sometime in the second half of 2015.
Tour of iLeasePro
Schedule a Demo
Check Out Knowledge Base
