• Register
Return to: Home > News > FASB and IASB 'disagree' on leasing standards

FASB and IASB 'disagree' on leasing standards

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are divided over certain components of their leasing standards review.

The FASB and the IASB discussed different methods of amortising the right-of-use asset, in response to feedback received regarding the income statement effects. 

The two standard setters expressed support for two different approaches during a meeting in London this week as part of their project related to income statement changes for lessees.

The IASB supported a new approach and said the lessee should amortise the right-of-use asset based on the estimated consumption of the underlying leased asset over the lease term.

Consequently, the higher the consumption rate, the more the income statement effects would resemble those that would arise from purchasing the underlying asset and financing it separately. The lower the rate of consumption, the more the income statement effects would resemble the rental expense pattern under current operating lease accounting.

The FASB said its view was consistent with the 2010 Leases Exposure Draft and the lessee should amortise the right-of-use asset on a systematic basis reflecting the pattern of consumption of expected future economic benefits for those leases for which substantially all of the risks and rewards of the underlying leased asset have been transferred to the lessee.

While for leases that do not transfer substantially all of the risks and rewards of the underlying leased asset, the lessee would use an amortisation approach resulting in recognising the total lease expense in a pattern that would typically resemble the rental expense pattern under current operating lease accounting.

Both the IASB and FASB are due to re-release the leasing exposure draft in Q2 this year.

 

Top Content

    Choosing the right location can have cast-iron benefits

    As Game of Thrones, one of the biggest television shows of all time, comes to an end, Joe Pickard looks at how tax incentives offered to television and film production companies help the wider economy.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    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.