FASB and IASB Seek Lease Standards Publication Next Year
Hoping to publish final standards late next year, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) will restart discussions this fall on their lease accounting project. It is anticipated that the final standards will be based on FASB’s Proposed Accounting Standards Update No. 2013-270, Leases (Topic 842), and the IASB’s Exposure Draft No. 2013-6, Leases. Both proposals were published in 2013.
Before completing work on their project, the FASB and IASB must resolve several disagreements on proposed changes to accounting in U.S. GAAP and International Financial Reporting Standards. Such disagreements include how to handle accounting for lease expenses. While the IASB supports a single approach to lessee accounting and handling nearly all leases as financing transactions, the FASB is inclined to classify leased items as either “Type A” (most of the value is used up throughout the contract as a financing agreement) or “Type B” (assets with most of their value remaining at the contract’s end are regarded as rentals).
Furthermore, the FASB and IASB have conflicting views on small-ticket, high volume dealings. The IASB wants a small-ticket exemption, but the FASB feels such an exemption may clash with the U.S. Securities and Exchange Commission’s requirements for disclosing “material” amounts. For instance, the lease of one photocopier or iPad is insufficient for reporting, but a contract covering the leasing of thousands of photocopiers or tablets in a company could be large enough to be documented.
Despite the boards’ schedule on publishing the standards are uncertain, the FASB’s Thomas Linsmeier recently stated that expecting a release date during the first half of 2015 would be “ambitious.” Additionally, Linsmeier reiterated the FASB’s dedication to working on a converged standard with the IASB, but the U.S.-based standard setter will not ignore U.S. companies or investors’ interests.