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Comparison between U.S. GAAP and International Financial Reporting Standards 57
5. Liabilities
5.1 Leases
Note: In August 2010, the IASB and FASB issued proposed guidance on leases that, if finalized, would overhaul
existing lease accounting guidance and impact virtually every organization.
The IASB Exposure Draft, Leases, and the proposed FASB Accounting Standards Update with the same title, are the
result of a joint effort to develop a single approach to lease accounting that would ensure that all assets and liabilities
arising from lease contracts are recognized on the balance sheet. The proposed guidance would affect substantially all
leases, except leases of intangible assets, biological assets, nonregenerative resources and leases that meet the
definition of an onerous contract in IAS 37 between date of inception and date of commencement.
Among the key provisions, the proposed guidance would establish a right-of-use model to account for all leases within
the scope of the proposed guidance. Under this model, a lessee would recognize an asset for its right to use the
leased asset for the lease term and a liability to make lease payments. A lessor that retains exposure to significant
risks and benefits associated with the underlying asset would apply a performance obligation approach; otherwise, a
derecognition approach would be applied.
Under the performance obligation approach, the lessor would continue to recognize the underlying asset, but would
also be required to recognize an asset for its right to receive lease payments and a lease liability. Under the
derecognition approach, the lessor would derecognize the underlying asset that it transfers to the lessee and would
recognize an asset for its right to receive lease payments. The lessor would also recognize a residual asset for its
rights to the underlying asset at the end of the lease term.
The Exposure Draft does not specify an effective date because the Boards plan to separately address the effective
dates for all of their convergence projects. Entities would be required to apply the new lease accounting model to all
leases within the scope of the proposed guidance that are outstanding on the date of initial application using a
simplified retrospective method. The proposed guidance would supersede the guidance in IAS 17, Leases and in
ASC 840, Leases.
The Boards received significant feedback on the proposed guidance through the comment letter process, roundtable
discussions, and outreach activities and are in the process of redeliberating the conclusions in the proposed guidance.
The Boards have targeted June 2011 as the date a final standard will be issued.
IFRS
Relevant guidance: IAS 17 and 40; SIC-15 and 27;
IFRIC 4
U.S. GAAP
Relevant guidance: ASC 840
Introduction
A lease is an agreement in which the lessor conveys
the right to use an asset to the lessee for an agreed
period of time in return for payments (IAS 17.4).
IFRIC 4 provides that an arrangement is or contains a
lease if based on the substance of the arrangement
both of the following exist (IFRIC 4.6):
• Fulfillment of the arrangement depends on the use
of a specific asset or assets
• The arrangement conveys a right to use the asset
A lease is classified as either an operating or a finance
lease at the inception of the lease (IAS 17.13). The
Similar to IFRS except that U.S. GAAP refers to a right to
use property, plant, and equipment (ASC Master
Glossary, “Lease”). Therefore, IFRS covers a broader
range of leases.
Similar to IFRS. Lease inception is the date of the lease
agreement or commitment, if earlier. The commitment
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