The FASB and the IASB (“the Boards) met earlier this week to continue discussing their Joint Project on Lease Accounting. Converged decisions were reached on a number of issues but the Boards also reached different decisions on certain matters.
A fundamental difference between the two Boards continues to impact many of the deliberations. The FASB has tentatively decided that there will be two types of leases, Type A and Type B, depending on the nature of the underlying asset and the extent of the lease term. The IASB is pursuing a single accounting model for all leases. This difference will impact the expense recognition pattern for certain leases. Both Boards continue to discuss an exemption for short term or small ticket leases.
In this month’s meeting, the Boards decided that a sublease where a lessee subleases its space and then becomes a lessor would be accounted for as two separate lease contracts, except in certain instances where the contracts were entered into at or near the same time. But the different approach mentioned in the previous paragraph will impact the specific accounting for the sublease.
The Boards also discussed the balance sheet presentation for the right-of-use asset and the lease liability and basically concluded that they would either be presented on the face of the balance sheet or disclosed in the footnotes to the financial statements. The FASB also determined that the Type A lease liabilities would be presented separately from Type B lease liabilities.
There are several other issues that will be discussed in future meetings, however, the list of open items continues to get much shorter.