• Register
Return to: Home > News > Standards > IASB and FASB fail to agree on lease accounting

IASB and FASB fail to agree on lease accounting

Hopes of a converged lease accounting standard between the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been set back after a meeting between the two boards on 18 and 19 March revealed a difference in opinion.

The meetings followed near universal opposition to proposed changes to lease accounting rules aimed at getting leases onto companies' balance sheets.

As a result, in January 2014, Hans Hoogervorst, IASB chairman, said they had started re-deliberations and expected to announce a number of decisions in March.

At a meeting, the boards found common ground on exemptions for short-term leases and that both lessee and lessor should include extension options in the lease term if a lessee had a significant economic incentive to exercise such options.

However, the two boards had different opinions on how to recognise the expense associated with leased assets for the lessee.

The FASB members supported a dual model for lessee accounting, with lease classification determined in a manner similar to current leasing requirements.

In this approach, most existing capital and finance leases would be counted as "Type A leases," which recognises amortization of the right of use asset separately from interest on the lease liability. Most operating leases would be accounted as "Type B leases," and would be recognised as a single total lease.

The IASB instead wanted more of a singular approach to accounting, with most leases classed as a Type A lease.

For the lessor, the boards agreed the lessor should determine if a lease is classed as a Type A or a Type B lease on the basis of whether the lease is considered a financing arrangement or sale, or if it is considered an operating lease.

The IASB and FASB are still working to find agreement, and jointly released a statement which said: "While differences remain, most notably in their preferred approaches to expense recognition, the Boards are committed to working together to minimize these differences and to creating greater transparency around lease transactions for the benefit of investors worldwide".

Related Links

The Financial Accounting Standards Board

The International Accounting Standards Board

Top Content

    2018 Digital Accountancy forum and awards: Digital transformation

    The Accountant presents highlights from The Digital Accountancy Forum & Awards 2018 panel discussions

    read more

    2018 Digital Accountancy Forum and Awards: Tech deep dive

    The second panel session of the day saw experts discuss how new technologies should not just be seen as a threat, and could be used to improve accounting.

    read more

    Digital Accountancy Forum and Awards: The power of data

    The third panel discussion of the day saw panellists discuss some of the worries their clients have had, how to overcome them, and how data and technology are providing real business opportunities.

    read more

    Digital Accountancy Forum and Awards: The next generation

    With young people more mobile, and technology changing the industry rapidly, the final panel session of the Digital Accountancy Forum looked at how firms would need to adapt to the new reality

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.