The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, the Boards) met on July 23, 2014 to continue further discussions on their Joint Proposal on Lease Accounting. With respect to lessee accounting issues, most of the discussion was narrowly centered on accounting for sale and leaseback transactions. The Boards determined that a seller/lessee would look to the new revenue recognition guidance to determine whether a sale has been consummated in a sale and lease back transaction.
Since the Boards are pursuing different approaches to lessee accounting where the FASB has opted for two types of leases (Type A and Type B) and the IASB has a single lease model, decisions on issues such as sale and lease back will be impacted by this difference. For example, the FASB determined that if the seller/lessee concludes that a lease transaction is a Type A lease, then by definition no sale has occurred. The IASB did not comment on that issue but indicated that if the seller/lessee has a substantial repurchase option with regard to the underlying asset, then no sale has occurred.
The Boards will continue their deliberations on the Joint Project in future meetings.