IPSASB’s Exposure Draft 64, Leases also proposes new public sector specific accounting requirements for leases at below market terms (also known as ‘concessionary leases’) for both lessors and lessees.

For lessees, ED 64 proposes accounting requirements that are converged with IFRS 16, Leases, by requiring the recognition of a right-of-use asset and a lease liability for all leases, except for short-term leases and leases of low-value assets.

For lessors, ED 64 outlines a right-of-use model specifically designed for public sector financial reporting that differs from the risks and rewards incidental to ownership model for lessors in IFRS 16.

The draft proposes continuing to recognise and measure the leased asset according to the applicable IPSAS; and recognizing a lease receivable and a liability (unearned revenue) as a result of the lease contract, except for short-term leases.

The proposals in ED 64 address common public sector lease contracts where a lessor and a lessee are part of the same economic entity.

Ian Carruthers, IPSASB chair, said: ‘Leases, including concessionary leases, are very important financing mechanisms in the public sector and in international organisations. The proposals in ED 64 will provide better information on the financial impacts of leases and therefore enhance both the accountability of an entity for its management of resources and improve the quality of information for decision-making.’

The deadline for comments is 30 June.

Exposure Draft 64 Leases is here.

Report by Pat Sweet