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Accounting for Leases FASB / IASB Joint Project

Accounting for Leases FASB / IASB Joint Project. Private Company Financial Reporting Committee September 2007. BACKGROUND. FAS 13 issued November 1976 Existing interpretive pronouncements: 6 FINs 10 FTBs 13 EITFs 1 FSP AICPA guidance SEC guidance 6/2004 – FASB/IASB: “take a fresh look”.

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Accounting for Leases FASB / IASB Joint Project

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  1. Accounting for LeasesFASB / IASB Joint Project Private Company Financial Reporting Committee September 2007

  2. BACKGROUND • FAS 13 issued November 1976 • Existing interpretive pronouncements: • 6 FINs • 10 FTBs • 13 EITFs • 1 FSP • AICPA guidance • SEC guidance • 6/2004 – FASB/IASB: “take a fresh look”

  3. BACKGROUND, cont’d • 4/2006 – FASB/IASB discuss jointly • 7/2006 – Project added to agendas • 12/2006 – Joint Working Group formed • 2/2007 – Joint Working Group met • 3/2007 – FASB & IASB met separately • 4/2007 – FASB/IASB met jointly re: scope • 5/2007 – IASB met re: lease options • 6/2007 – FASB & IASB met separately

  4. TENTATIVE DECISIONS • Right-of-Use Model (3/2007) • Lessee accounting: • Asset for right to use leased item • Liability for payment obligations • No liability for obligation to return item • Lessor accounting: • Asset for right to receive payments • Asset for end-of-term residual value • No liability for obligation to permit use of item

  5. TENTATIVE DECISIONS, cont’d • Scope (4/2007) • Focus on arrangements in current literature • Conveyances of right to use another’s asset to be considered prior to issuance of PV

  6. TENTATIVE DECISIONS, cont’d • Measurement Approaches (6/2007) • Lessee’s right-of-use asset alternatives: • Intangible asset • Nature of the leased item (IASB prefers) • Separate model (FASB prefers) • Lessee’s liability for payments alternatives: • Fair value • Effective interest method, with FVO • Staff to further develop approaches

  7. OTHER DISCUSSIONS • Lease Option Alternatives (5/2007) • Right to use to exercise date + option to extend • Right to use for period including extensions + option to terminate • “Most probable lease term” approach (options not separated) • Expected value of payments (options not separated)

  8. OTHER DISCUSSIONS, cont’d • Recognition Alternatives (6/2007) • Upon signing of lease contract • Upon delivery of leased item

  9. FUTURE PLANS • FASB/IASB to meet jointly in 9/2007 • Preliminary Views to be published in 2008

  10. FOR MORE INFORMATION See Project Update on FASB’s website at: http://72.3.243.42/project/leases.shtml

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