SUMMARY OF BOARD DECISIONS

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 a final standard.

June 17, 2009 Board Meeting

Leases. The Board discussed several lessee accounting issues that were not addressed in the March 19, 2009 Discussion Paper, Leases: Preliminary Views. The Board reached the following tentative decisions:

    Sale and leaseback transactions

1. In a sale and leaseback transaction, a seller/lessee would consider whether the entire leased asset qualifies for derecognition. If the entity determines, after applying the applicable guidance for the underlying asset, that the transaction qualifies as a sale, it would derecognize the leased item and recognize a right-of-use asset and an obligation to make rental payments for the leaseback. The Board will consider whether additional criteria are needed to help entities determine whether a sale and leaseback transaction represents a sale and how to account for a sale and leaseback transaction when the sales prices or rental payments are not at market rates.
   

    Impairment of the right-of-use asset

2. A lessee preparing financial statements in accordance with international financial reporting standards would follow the guidance in IAS 36, Impairment of Assets, to determine whether its right-of-use asset is impaired and a loss should be recognized.   A lessee applying U.S. generally accepted accounting principles would follow FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to determine whether its right-of-use asset is impaired and a loss should be recognized.
   

    Revaluation of the right-of-use asset

3. A lessee would subsequently report a right-of-use asset at cost adjusted for amortization and impairment losses, if any.   A lessee would not be permitted to subsequently remeasure its right-of-use asset to fair value unless required to do so to recognize an impairment loss.
   

    Initial direct costs

4. A lessee would expense any initial direct costs as incurred.
   

    Transition

5. A lessee would apply the new lease standard by recognizing an obligation to pay rentals and a right-of-use asset for all outstanding leases at the transition date. The obligation and the asset would be measured at the present value of the lease payments, discounted using the lessee’s incremental borrowing rate on the transition date.