IASB ramps up outreach activities on lease reform

The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) are conducting various outreach activities during the second comment period on plans to reform of lease accounting.

Widespread objections to the original proposals have resulted in a second exposure draft on the plans to reform lease accounting.

The boards will meet with investors, lenders and analysts in the US, Europe, Hong Kong and Tokyo to review the proposals outlined in the second exposure draft.

Final deliberations on the proposals for the revised standard will be held in the last quarter of 2013.

Responding to concerns about the costs of the revised lease accounting standard, the boards will conduct fieldwork during August and September, meeting individually with lessees and lessors to discuss in detail the steps that those preparers need to take to implement the proposals. The objective is to obtain a more detailed understanding of the anticipated costs of implementation and any incremental ongoing costs.

The new proposals will remove the advantageous off-balance sheet treatment that operating leases currently offer. But ratings agency Fitch has warned that companies could still use off-balance sheet treatments to account for leases to circumnavigate the new rules.

Options include switching to a lease with a term of less than 12 months, although the rules attempt to address this by including renewal options within the 12 month period. Companies may also try to replace leases with contracts that give them access to a desired service without giving them rights over a specific asset.

There will also be a series of public round table meetings in September and October 2013 in London on 16 September, in the US in Los Angeles and Norwalk, Singapore and Sao Paulo.

To register to attend a round table meeting, click HERE

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