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A Perspective on the Joint IASB/FASB Exposure Draft on Accounting for Leases

16 Pages Posted: 28 Feb 2011 Last revised: 11 Jun 2013

Yuri Biondi

French National Center for Scientific Research (CNRS)

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management

Jonathan C. Glover

Columbia Business School

Karim Jamal

University of Alberta - Department of Accounting, Operations & Information Systems

James A. Ohlson

Hong Kong Polytechnic University - School of Accounting and Finance

Stephen H. Penman

Columbia Business School - Department of Accounting

Eiko Tsujiyama

Waseda University - Graduate School of Commerce

T. Jeffrey Wilks

Brigham Young University

Date Written: February 23, 2011

Abstract

The International Accounting Standards Board (IASB) and The Financial Accounting Standards Board (FASB) recently issued a joint exposure draft on accounting for leases. This exposure draft seeks to shift lease accounting from an “ownership” model to a “right-to-use” model. Under the current ownership model, leases can be reported on balance sheet (finance leases) if certain tests are met, or off balance sheet (operating leases) if those tests are not met. The new model seeks to report all leases on the balance sheet based on the present value of lease obligations without any bright line tests, and no sharp on or off the balance sheet classifications.

We are sympathetic to the standard setters concern that the current lease standard is being manipulated improperly by managers resulting in large amount of debt being reported off balance sheet. We provide a discussion of current lease accounting and the proposed exposure draft. We also comment on five key issues covered by the exposure draft: the definition of a lease, the initial measurement and eventual reassessment at fair values, the accounting for lessors, the impact of lease accounting on recognition and income measurement, and classification of lease accounting elements and their impact on accounting ratios.

This comment was developed by the Financial Accounting Standards Committee of the American Accounting Association and does not represent an official position of the American Accounting Association.

Suggested Citation

Biondi, Yuri and Bloomfield, Robert J. and Glover, Jonathan C. and Jamal, Karim and Ohlson, James A. and Penman, Stephen H. and Tsujiyama, Eiko and Wilks, T. Jeffrey, A Perspective on the Joint IASB/FASB Exposure Draft on Accounting for Leases (February 23, 2011). Accounting Horizons, Vol. 25, No. 4, 2011; University of Alberta School of Business Research Paper No. 2013-681; Johnson School Research Paper Series No. 16-2011. Available at SSRN: https://ssrn.com/abstract=1768083 or http://dx.doi.org/10.2139/ssrn.1768083

Yuri Biondi (Contact Author)

French National Center for Scientific Research (CNRS) ( email )

IRISSO - University Paris Dauphine PSL
Place Marechal Lattre Tassigny
75016 Paris
France

HOME PAGE: http://yuri.biondi.free.fr/

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

450 Sage Hall
Ithaca, NY 14853
United States
607-255-9407 (Phone)
607-254-4590 (Fax)

Jonathan C. Glover

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States
212-854-1911 (Phone)

Karim Jamal

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-5829 (Phone)
780-492-3325 (Fax)

James A. Ohlson

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon
China

Stephen H. Penman

Columbia Business School - Department of Accounting ( email )

3022 Broadway
New York, NY 10027
United States
212-854-9151 (Phone)
212-316-9219 (Fax)

Eiko Tsujiyama

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
81-3-5286-2048 (Phone)
81-3-3203-7067 (Fax)

HOME PAGE: http://www.waseda.jp/gradcom/index-e.html

Thomas Jeffrey Wilks

Brigham Young University ( email )

School of Accountancy
526 Tanner Building
Provo, UT 84602 84602
United States
801-422-3930 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/directory/details?id=5337

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