Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board´s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.
September 20, 2012 Joint FASB/IASB Videoconference Board
Leases. The IASB and the FASB discussed questions that have been raised about the Boards´ tentative decisions regarding sale and leaseback transactions; issues on how a lessee would account for leases under the single lease expense (SLE) approach; and issues on determining which lease approach should be applied.
Sale and Leaseback Transactions
The Boards discussed how the revenue recognition guidance being developed by the Boards should be applied in the context of sale and leaseback transactions. The Boards tentatively decided to clarify the following:
SLE Approach — Accounting after Impairment of the ROU Asset
The Boards discussed the accounting after an impairment of the right-of-use (ROU) asset under the SLE approach, noting that the current tentative decision is to refer to existing impairment guidance in IFRSs and U.S. GAAP when assessing the ROU asset for impairment.
The Boards tentatively decided that when the ROU asset is impaired, the lessee should continue to recognize the remaining lease expense in each period on a straight-line basis. However, the total lease expense recognized in any period should not be lower than the amount of the periodic unwinding of the discount on the lease liability. When the ROU is fully impaired, this would result in the lessee recognizing the remaining lease expense in an amount equal to the periodic unwinding of the discount on the lease liability (i.e., the remaining lease expense would no longer be recognized on a straight-line basis). The lessee should present lease expense recognized in the remaining periods in accordance with the decisions reached under the SLE approach.
SLE Approach — Lease Expense Recognition Pattern
The Boards tentatively decided that, under the SLE approach, a lessee should be required to recognize total lease expense on a straight-line basis.
Lease Approach — Date of Assessment
The Boards discussed the timing of assessing which lease approach to apply and tentatively decided that an entity should determine the lease approach at lease commencement only.
Lease Approach — Which Asset to Evaluate in a Sublease
The Boards tentatively decided that, for the purpose of assessing which lease approach to apply, a lessor and a lessee should evaluate the lease with reference to the underlying asset (not the ROU asset) to determine the appropriate accounting approach to apply to the sublease.
There are a few remaining FASB-only issues to be addressed, and then the staff will draft the revised Leases Exposure Draft. The plan is to publish the Exposure Draft in the first quarter of 2013.