The International Accounting Standards Board (IASB) is proposing a fundamental change to the way lease contracts are accounted for by both lessees and lessors. This article aims to summarise the proposed change.
This article explains why the IASB decided to add a project on lease accounting to its agenda; outlines the proposed approach to lessee accounting; discusses how the proposals will affect lessors of real estate; and describes the next steps in the project.
The proposed changes described in this article will require lessees to recognise assets and liabilities in respect of operating leases on their balance sheet. This will affect lessees of real estate, because many property leases are currently classified as operating leases. The proposed changes will also have a significant effect on any lessor that carries investment property at cost rather than fair value.
Interested parties have the opportunity to comment on the proposals summarised in this article when the IASB publishes an exposure draft of the proposed changes in the third quarter of this year.
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