Basel Committee Issues Lease Accounting Guidance

April 13, 2017

Last week, the Basel Committee on Banking Supervision issued interpretative guidance for the Financial Accounting Standards Board and International Accounting Standards Board’s upcoming lease accounting changes. Presented as frequently asked questions, the guidance relates to Accounting Standards Update No. 2016-02, Leases (Topic 842), and International Financial Reporting Standards 16, Leases.

Specifically, the three questions cover how new assets and liabilities are disclosed on bank balance sheets due to the FASB and IASB’s changes to accounting for a company’s rented office space and equipment. The first question says that a leased intangible asset should be exempt from the regulatory capital calculation. In the second question, the Basel Committee says that if the leased asset is a tangible asset, then it should be part of the risk-based capital and leverage denominators. For the third question, the committee advises that leased tangible assets are risk-weighted at 100 percent.

Both lease accounting standards become effective in 2019.