A new leasing exposure draft released today jointly by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) will affect construction companies and airlines in particular, KPMG New Zealand said.Th
A new leasing exposure draft released today jointly by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) will affect construction companies and airlines in particular, KPMG New Zealand said.
The proposals are a response to criticism of off balance sheet accounting by lessees.
Simon Lee, national technical director, KPMG, said the proposals will affect most companies but will particularly those operating leases of large expensive assets like aircraft or mining and construction equipment.
The transition to the new proposals will require analysis of all existing leases. Lessors and lessees with large portfolios will have to make significant system changes.
Two different models are proposed. Under a performance obligation model, the lessor recognises the leased asset, an asset for lease rentals and a liability for permitting use of the leased asset.
Under the derecognition model, the lessor derecognises the leased asset and recognises an asset for the lease rentals and a residual value asset for its interest in the leased asset at the lease end.
The performance obligation approach is be more likely to be used for operating leases and the derecognition approach is likely to be used for finance leases.
