In a major shake-up of lease accounting, the IASB and FASB have published proposals to bring most leases on-balance sheet for lessees. A dual model would apply, based on a new lease classification test, which would impact the profile of lease income or expense recognised over the lease term.
Implementing the proposals would be a real challenge for many organisations. The impacts – including significant effort to identify leases and extract lease data, changes in financial metrics, and balance sheet volatility – would be felt across sectors.
Companies that lease high-value assets would see large increases in reported liabilities, while companies with large volumes of lower-value leases could face high implementation costs.
Comments are due to the IASB by 13 September 2013.
Our In the Headlines helps you to understand what the proposals could mean for your business.