News highlights for March 2012
In one of their most important convergence projects, FASB and the International Accounting Standards Board (IASB) reached tentative decisions on aspects of the treatment of leases in financial reporting.
How to account for leases is one of four remaining major areas in which FASB and the IASB are trying to reach convergence in standards.
The boards issued the initial exposure draft on leases in August 2010. In July, the boards announced a decision to re-expose a revised proposal. The boards intended to complete their deliberations in the third quarter of this year, with hopes of publishing a revised exposure draft shortly afterward.
That draft has yet to emerge. But the boards announced tentative decisions with regard to leases as a result of their joint meetings this week.
On cancellable leases, the boards tentatively decided that the lease proposals should apply only to periods when enforceable rights and obligations exist. Cancellable leases would be defined as short-term leases if the initial noncancellable period, combined with any notice period, is less than one year.
These standards would exist for leases that:
- Can be canceled by the lessee and lessor with minimal termination payments, or
- Include renewal options that the lessor and lessee must agree to.
The complete text of the decisions is available at tinyurl.com/c9mu8bc.
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