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Project Update

Leases—Joint Project of the FASB and the IASB

Last updated on September 2, 2010. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the FASB and the IASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

*OUTREACH/FIELD WORK

On September 2, 2010, the Boards published a questionnaire for lessees and lessors as part of their outreach on the Leases project.

In the questionnaire, the boards are surveying organizations on their use of, and accounting for, leases. Completing the questionnaire does not require knowledge of the boards' proposals. For more details, click here.

The deadline to complete the questionnaire(s) is September 30, 2010.

DUE PROCESS DOCUMENTS

On August 17, 2010, the Boards published, for public comment, an Exposure Draft, Leases. The Exposure Draft will be open for public comment until December 15, 2010.

• Download the FASB Exposure Draft.
   
• Download the IASB Exposure Draft.
   
• Read the Exposure Draft Comment Letters.
   
• Read the press release introducing the Exposure Draft.
   
• Read the FASB In Focus and the IASB Snapshot, which provide summaries of the proposals contained in the Exposure Draft
   
• Listen Now or Download the Podcast on the Exposure Draft

• Download the FASB Discussion Paper. Download the IASB Discussion Paper, which is the same except for minor differences in spelling, style, and format. 
   
• Read the press release introducing the Discussion Paper. 
   
• Read a snapshot of the Boards’ preliminary views in the Discussion Paper.

• Discussion Paper Comment Letters 
   
• Discussion Paper Comment Letter Summary 

• Leasing is an important source of finance. Therefore, it is important that lease accounting should provide users of financial statements with a complete and understandable picture of an entity’s leasing activities. The existing accounting models for leases require lessees to classify their leases as either capital leases or operating leases. However, those models have been criticized for failing to meet the needs of users of financial statements because they do not provide a faithful representation of leasing transactions. In particular, they omit relevant information about rights and obligations that meet the definitions of assets and liabilities in the boards’ conceptual framework. The models also lead to a lack of comparability and undue complexity because of the sharp bright-line distinction between capital leases and operating leases. As a result, many users of financial statements adjust the amounts presented in the statement of financial position to reflect the assets and liabilities arising from operating leases.
   
• Accordingly, the FASB and the IASB initiated a joint project to develop a new approach to lease accounting that would ensure that assets and liabilities arising under leases are recognized in the statement of financial position.
   
• To meet that objective, the FASB and the IASB have jointly developed draft guidance on leases and, hence, are proposing an International Financial Reporting Standard (IFRS) and amendments to the FASB Accounting Standards Codification^TM. The Boards developed the proposals after considering responses to their Discussion Paper, Leases: Preliminary Views, which was published in March 2009.
   
• Although many of the problems associated with existing lease guidance relate to the treatment of operating leases in the financial statements of lessees, keeping the existing lease guidance for lessors would be inconsistent with the proposed approach to lessee accounting. It also would be inconsistent with the Boards’ proposed approach to revenue recognition, which is described in the proposed FASB Accounting Standards Update, Revenue Recognition (Topic 605): Revenue from Contracts with Customers. Consequently, the Exposure Draft on leases deals with both lessee accounting and lessor accounting.
   
• For additional information and a summary of the proposed model, please see the Exposure Draft on leases.

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