On August 18, 2010, the Financial Accounting Standards Board (“FASB”) issue an exposure draft of a new accounting standard relating to lease accounting (“Exposure Draft”). Some of the highlights of the proposed standard are:
- All leases will be “capitalized” via the creation of a “right to use” asset and corresponding “lease obligation” liability.
- The asset/obligation calculation (“Lease Calculation”) will be based on a present value of the lease period cash flows using the lessee's incremental borrowing rate.
- The proposed standard defines the lease term as “the longest possible term deemed more likely than not to occur.” Lease Calculations will be done by applying estimates of the “probability of occurrence” of each possible term and taking into account the effects of any options to extend or terminate the lease.
- Existing leases will be required to be “restated” for all prior periods presented.
- Lessor accounting will follow either a “performance obligation” or “derecognition” approach.
Download the alert for more details, plus recommended next steps.
Average Rating:
Length: 2 pages (PDF 170 kB)