Presentation Transcript

1. Revised Exposure Draft—Leases

   This presentation has been prepared to help stakeholders understand the current status of the leases project of the FASB and the IASB. The views expressed in this presentation are those of the presenters. Official positions of the FASB and the IASB are reached only after extensive due process and deliberations.
2. Presenters for Today’s Webcast Darrel Scott, IASB member Patrina Buchanan, Technical Principal Sarah Geisman, Technical Manager
3. Housekeeping Items Download slides by clicking on the button below the slides window Ask a question by typing into the designated text box on your screen and clicking “submit” Remember to turn off your pop-up blocker A webcast recording will be available online at www.ifrs.orgfor 90 days
4. Leases ED is Available The documents are available online at www.ifrs.org The comment period ends on 13 September 2013 Send comments electronically to the IASB website (www.ifrs.org) using the “Comment on a Proposal” page
5. Agenda Background Lessee accounting Lessor accounting Other aspects Next steps
6. Why a Leases project? Lessee Most assets and liabilities are off-balance-sheet Limited information about operating leases Lessor Lack of transparency about residual values Consistency with lessee proposals and revenue proposals $1.25 trillion of off-balance- sheet operating lease commitments for SEC registrants* * Estimate according to the 2005 SEC report on off-balance-sheet activities
7. How the proposals are an Improvement Existing accounting issues How the proposals are an improvement How the proposals address the issues Greater transparency about leverage, assets used in operations, and cash flows Most assets and liabilities are off-balance-sheet Recognition of lease assets and liabilities for all leases of more than 12 months Lessee Insufficient disclosure about operating leases Enhanced disclosure requirements Lessee Greater transparency about residual values Lack of transparency about residual values of equipment and vehicles Separately account for residual asset Enhanced disclosures about residual asset’s exposure to risk Lessor
8. Proposed right-of-use model A lease contract conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration Lessor Lessee Right-of-use asset Lease payments
9. There is a wide spectrum of lease transactions with different economics Dual approach Start of lease End of lease Asset consumption more than insignificant Most equipment/ vehicles Asset consumption not more than insignificant Most real estate
10. Lease classification test
11. Lessee accounting model Balance sheet Income statement Cash flow statement Type A Type B
12. Lessee disclosures
13. Lessor accounting model Income statement Cash flow statement Balance sheet Type A Type B
14. Lessor disclosures
15. Reducing Cost and Complexity in Response to Feedback on the 2010 ED Short-term leases Option to exclude leases with a maximum term of 12 months or less Variable lease payments Excluded if payments are not linked to an index or a rate Renewal options Excluded unless significant economic incentive to exercise the option
16. Next steps
17. Questions and Answers
18. Questions and Answers if readers already make an adjustment why is the change needed?
19. Questions and Answers can you explain the difference between the 'right of use' vs 'the right to control the use' definition of a lease and where you see the change in scope impacting current lease arrangements?
20. Questions and Answers Has the Board considered the issue of owned assets where parts of the whole asset are depreciated at different rates where they have different useful economic lives. How can this be applied to Type A right of use assets, or the previous 'finance leased assets' which in theory should have an amortisation profile similar to a purchased asset?
21. Questions and Answers what is ´more than insignificant´? It was promised more guidance would be included in the new Exposure Draft?
22. Questions and Answers Commercial lease agreements in real estate in EMEA are normally subject to at least an annual indexationbased on defined price indices. Will the lessee have to forecast the increase to account for it?
23. Questions and Answers Anymore guidance on "significant economic incentive" to be applied for assessing the renewal of options?
24. Questions and Answers Can you provide rationale for the proposed treatment of "deferred profit" for lessor’s R&R model?
25. Questions and Answers Do lessors who elected the short-term lease exception need to derecognise the underlying asset at the commencement date?
26. Questions and Answers What happens if you are under a Lessor model and the underlying asset is normally amortised under the unit of production method?
27. Questions and Answers Does the lessee include interest rate from the lessor or their own internal borrowing rate?
28. Questions and Answers If lessor is of a type B lease do you have to derecognise the asset - you mentioned short term leases but not all type b
29. Questions and Answers Do you expect a difference in identifying whether an arrangement contains or is a lease as under the current IFRIC 4?
30. Questions and Answers equipment/vehicles...will they be defined?
31. Questions and Answers Has the risk that the option to exclude short term leases with a maximum term of 12 months will lead to lease structuring opportunities to avoid the accounting required by the proposed standard been considered by the Board?
32. Questions and Answers How do you expect these proposals to feed into SME accounting
33. Questions and Answers Which effective date can be expected in the new standard?
34. Questions and Answers What are the proposals for the treatment of subleases?
35. Questions and Answers We are lessor of containers to more than 200 customers around the world. Each customers have more than 20 lease contracts. How does the ED expect us to disclose all contract terms in the audited accounts ? Thanks a lot
36. Questions and Answers On renewal options, there is an opportunity to leave these out if "does not show incentive" for lessee to exercise. Is there a threshold for this, dollar amount for or definition of incentive?
37. Questions and Answers Please elaborate on impairment test for lease receivable and residual asset.
38. Questions and Answers Are there any guidelines on Type B for real estate long leases - eg. 99 year leases. Will these be treated more like owned properties?