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