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Ifrs vs Us Gaap in Lease

In: Business and Management

Submitted By bjyangyang1984
Words 3855
Pages 16
Project
In July, 2006, the Board voted to add to its agenda a project on lease accounting. The project will be conducted jointly with the US Financial Accounting Standards Board (FASB) and is expected to result in the publication of a joint discussion paper in 2008.

The project will reconsider all aspects of lease accounting and is expected to fundamentally revise the way lease contracts are recognized in the financial statements of lessees and lessors. The Board directed the staff to establish a working group of individuals with significant experience and expertise in lease accounting to assist the staff and the Board with this project.
(http://www.ifrs.org/Current+Projects/IASB+Projects/Leases/Meeting+Summaries+and+Observer+Notes/IASB+July+2006.htm)

To explain the reason for adding the project to the agenda, I find two paragraphs in Exposure Draft that “Leasing is an important source of finance. Therefore, it is important that lease accounting should provide users of financial statements with a complete and understandable picture of an entity’s leasing activities. The existing accounting models for leases require lessees to classify their leases as either finance leases or operating leases. However, those models have been criticized for failing to meet the needs of users of financial statements because they do not provide a faithful representation of leasing transactions. In particular they omit relevant information about rights and obligations that meet the definitions of assets and liabilities in the boards’ conceptual framework. The models also lead to a lack of comparability and undue complexity because of the sharp ‘bright-line’ distinction between finance leases and operating leases. As a result, many users of financial statements adjust the amounts presented in the statement of financial position to reflect the assets and liabilities arising from

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