Last week the FASB and the IASB accounting standards boards met and took a solid step forward in finalizing new leasing standards that will impact customers reporting under International Financial Reporting Standards (IFRSs) and the U.S. Generally Accepted Accounting Principles (U.S. GAAP). Though the decisions are preliminary and final standards are still not here, the reaction from customers and partners has been positive. Several customers that I have spoken to are happy that clarity on the standard has been gained and that the standard is moving forward. Speaking to our partners and sales teams, the announcement has caused an increase in phone calls to their offices on the leasing topic.
In previous meetings, the boards had agreed that leases should be recorded on the balance sheet. In this week’s meeting, the boards gained clarity on the how leases would be recorded on the income statement. In summary, the boards adopted a dual approach to lease accounting. For some leases, more lease expense will be recorded up-front, and for other leases a straight-line expense will be recorded. The boards also provided more clarity on an aspect of lessor accounting related to investment property and real estate. The next step by the accounting boards is a series of meetings in mid-July leading to a joint Exposure Draft (ED) to be published in Q4. The final standards are expected by next Summer, but this could slip a bit depending on the comments that they receive on the exposure draft.
Several SAP colleagues are attending the IASB conference in Frankfurt in June and we will meet with an IASB member in July in the SAP oofices in Walldorf.
More information on the leasing announcements this week can be found at:
Press Release From the IASB:
Article from the Journal Of Accountancy: