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IASB Issues Its New Lease Standard

By:
Chris Gaetano
Published Date:
Jan 13, 2016
By Photos public domain [Public domain], via Wikimedia CommonsThe International Accounting Standards Board (IASB) today released its new standard on leases, a major component of the convergence project with the Financial Accounting Standards Board (FASB). 

"These new accounting requirements bring lease accounting into the 21st century, ending the guesswork involved when calculating a company’s often-substantial lease obligations," said IASB Chair Hans Hoogervorst. "The new Standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off balance sheet lease financing is no longer lurking in the shadows. It will also improve comparability between companies that lease and those that borrow to buy."

Like the FASB standard, which was approved in November, the new rules require that all leases be placed on the balance sheet, though where it differs is that it doesn't make distinctions between types of leases in their treatment. By contrast, the FASB standard has Type A leases, generally things like equipment and vehicles, and Type B leases, generally things like real estate. This difference had been a major source of tension between the two boards, according to a 2014 Wall Street Journal article, and despite attempts to come together on a singular approach, an accord failed to be reach, resulting in the two different methods.