FASB, Financial Accounting Standards Board.

Leases—Joint Project of the IASB and FASB

Last Updated:  May 16, 2013

*BACKGROUND INFORMATION

Outreach on Exposure Draft (2010)

Webcast

On Thursday July 19, 2012, the staff of the IASB and the FASB held a joint webcast to provide an update on the lessee and lessor accounting proposals, focusing on the decisions reached at the joint Board meeting in June 2012. Click here for a recording of the webcast presentation. A podcast recording of the Question and Answer session is available here.

Joint Working Group Meetings

The Boards held joint leases working group meetings following the issuance of the 2010 ED as follows:

• Tuesday, January 24, 2012, in both Norwalk, CT, and London
• Monday, April 11, 2011, in London
• Friday, January 7, 2011, in Norwalk, CT.

Public Roundtable Meetings

The Boards held public roundtable meetings in December 2010 and January 2011 to discuss their August 2010 Exposure Draft on Leases. The Boards’ purpose in holding those meetings was to engage in a constructive dialogue about the Exposure Draft with a wide variety of stakeholders. To ensure the Boards received broad-based input, meeting participants represented a variety of perspectives, including those of preparers, auditors, investors, and other users of financial statements.

The public roundtable meeting dates were as follows:

• Friday, December 17, 2010, in London
• Monday, December 20, 2010, in Hong Kong
• Wednesday, January 5, 2011, in Chicago, Illinois
• Thursday, January 6, 2011, in Norwalk, Connecticut

Workshops

Representatives and staff members from each Board attended 15 preparer workshop meetings with over 90 participants in the following countries:

• November 22, 2010, in Brazil (two sessions)
• November 22, 2010, in Toronto (one session)
• November 24 and 25, 2010, in London (three sessions)
• November 29 and 30, 2010, in Norwalk, CT (four sessions)
• December 2, 2010, in Seoul (one session)
• December 3, 2010, in Tokyo (two sessions)
• December 7, 2010, in Melbourne (two sessions)

Preparer Questionnaire

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. More details.

Investor Questionnaire

On September 14, 2010, the FASB published a questionnaire for investors and analysts as part of its outreach on the Leases project.

In the questionnaire, the Board asks how the proposed new leases guidance might affect financial statement users’ analysis. More details.

Exposure Draft (2010)

On August 17, 2010, the Boards published, for public comment, an Exposure Draft, Leases. The comment period for the Exposure Draft ended on December 15, 2010.

• Download the FASB Exposure Draft.
• Download the IASB Exposure Draft.
• 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.
• Read the Exposure Draft Comment Letters.
• Read the Exposure Draft Comment Letter Summary.

Discussion Paper

On March 19, 2009, the Boards published, for public comment, a Discussion Paper, Leases: Preliminary Views. The comment period for the Discussion Paper ended on July 17, 2009.

• 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.
• Read the Discussion Paper Comment Letters.
• Read the Discussion Paper Comment Letter Summary.

Memorandum of Understanding (MoU)

In February 2006, the IASB and the FASB issued an MoU that described a joint work plan to expedite global convergence in accounting standards and that established a series of milestones to be reached by 2008. The leases project is part of the 2006 MoU. Under the 2006 MoU, the IASB and the FASB would have to consider and make a decision about the scope and timing of a potential leasing project by 2008. This goal was achieved when the IASB and the FASB added the leasing project to their respective agendas on July 19, 2006.

The Boards recently updated the 2006 MoU at the April 2008 joint meeting. As part of the updated MoU, the leases project’s estimated completion date is 2011.

History of the Leases Project

FASB Statement No. 13, Accounting for Leases, issued in 1976, provides guidance on accounting for leases for both lessors and lessees. According to the provisions of Statement 13, a lessee should recognize both an asset and a liability for a lease that transfers substantially all benefits and risks incident to the ownership of property, and a lessor should recognize such a lease as a sale or financing. Under Statement 13, a lease that does not transfer substantially all benefits and risks incident to the ownership of property is classified as an operating lease by the lessee. Under operating lease classification, the lessee does not recognize any elements of the lease on its balance sheet (that is, it does not recognize an asset for the right to use the leased item or a related liability for the future lease payments); rather, the lessee recognizes rental expense as it becomes payable.

IAS 17, Leases, was issued by the IASC in 1982 and was very similar to Statement 13 as it was based on the extent to which risks and rewards incident to ownership of a leased asset lie with the lessor or the lessee. Although IAS 17 has been amended several times, its most recent version retains the fundamental approach to the accounting for leases contained in the original standard.

Following the issuance of Statement 13 and IAS 17, the FASB, IASB, Emerging Issues Task Force (EITF), Standing Interpretations Committee (SIC), International Financial Reporting Interpretations Committee (IFRIC), Securities and Exchange Commission (SEC), and American Institute of Certified Public Accounting (AICPA) issued numerous pieces of guidance addressing various issues relating to the application of Statement 13 and IAS 17. Some believe that the additional guidance adds to the complexity of existing guidance in this area.

The Boards considered adding a lease accounting project to their agendas in response to the criticisms of many of their constituents, including the FASB’s Financial Accounting Standards Advisory Council (FASAC), the FASB’s User’s Advisory Council (UAC), and the SEC’s 2005 Report and Recommendations Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 On Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers (Off-Balance Sheet Report). Many of those constituents indicated that current lease accounting standards fail to provide complete, transparent information and urged the Boards to undertake a lease accounting project. Also, in June 2004, the IASB and the FASB agreed that accounting for leases was in need of a fresh look and that any resulting improvements should be made through a major project conducted jointly when resources permitted.

Standard-setting activity during the past 20 years has not been limited to merely interpreting the leasing approach in Statement 13 and IAS 17. For example, a group of international standards setters (including FASB representatives), referred to as “the G4+1,” undertook an effort to reconsider the accounting for leases based on the existing conceptual framework. Their efforts resulted in the issuance of two Special Reports issued in 1996 and 1999, respectively: Accounting for Leases: A New Approach and Leases: Implementation of a New Approach. These reports describe a proposed conceptual approach to lease accounting focusing on the fundamental components of lease transactions.

The issues relating to lease accounting that need to be addressed are much the same as those previously considered in the G4+1 Special Reports. However, the objective is to analyze these issues in terms that are consistent with current projects, particularly those on revenue recognition, nonfinancial liabilities, derecognition, and the conceptual framework. In July 2006, the FASB and the IASB decided to add a joint leasing project to their respective agendas because of their concern that the current accounting in this area does not clearly portray the resources and obligations arising from lease transactions.

Working Group

During the third quarter of 2006, the Boards sent out an invitation for nominations to join the joint international working group planned for this project (invitation for nominations). In the fourth quarter of 2006, the Boards announced the members of the working group (announcement of working group members).

The following table provides links to the IASB website for the leases working group meetings. The first column provides the date and location of the working group meeting with a link to the full meeting agenda, agenda papers, and the audio webcast of the meeting. The second column provides a link to the summary report of the working group meeting.

BOARD/OTHER PUBLIC MEETING DATES (AFTER THE ISSUANCE OF THE 2010 EXPOSURE DRAFT)

Board/Other Public Meeting Dates (prior to the issuance of the 2010 Exposure Draft)

Other Public Meetings

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