Funny that the IASB and FASB working together on a new lease accounting standard was totally kumbaya up until recently, when everything fell apart and both sides realized this convergadoption thing is totally never going to happen. Too bad, joining forces on revenue recognition made it seem so likely despite the fact that everyone including the guy who was pushing IFRS in the U.S. in the first place said it will never happen.
Now, the IASB has changed its tune on lease accounting and is down with doing whatever FASB isn't:
Leases is an important project that the IASB is undertaking jointly with the FASB. The IASB and the FASB (the boards) jointly published a revised Exposure Draft Leases (the 2013 ED) in May 2013. The boards have received extensive feedback on their proposals, and have heard a broad range of views. During the first half of 2014, the boards have redeliberated and reached tentative decisions on many aspects of the project. In the second half of 2014 the boards will continue their joint redeliberations and will decide upon the effective date of the new Leases Standard. The IASB expects to issue a new Leases Standard in 2015.
Wait a second, that sounds promising. Convergadoption back on? Not so fast:
The boards have made different tentative decisions regarding the recognition and presentation of lease expenses in a lessee’s income statement. The IASB has tentatively decided to propose a single lessee model that would require the recognition of interest and amortisation for all leases recognised on a lessee’s balance sheet. The FASB has tentatively decided to propose a dual model that retains the existing distinction between finance leases (ie leases that are in- substance purchases) and operating leases. This model would result in no change to a lessee’s income statement, but recognises all leases on the balance sheet.
The switch up isn't all that surprising when you look back to when the boards first started batting around the idea of a lease accounting change:
The boards originally proposed a single lessee model in the 2009 DP and 2010 ED. Some agreed with that model, while others did not. In response to requests from some to better reflect the economic differences between different leases, the boards proposed a dual model in the 2013 ED.
For the love of Piet Klynveld, can you people just make a decision already?
When the 2013 Exposure Draft came out, the IASB says people were like "no, that's too complicated" so the IASB is now going back to the single model concept, unlike their cantankerous American counterparts who are sticking by the dual model.
The good news here is even with the differing models, the IASB and FASB were able to agree (a.k.a. achieve substantial convergence) on four important items:
- Balance sheet recognition of leases—the main focus of the project
- Definition of a lease
- Measurement of lease liabilities
- Lessor accounting unchanged
Oh, thank goodness they were both able to agree on the definition of a lease or this whole idea of convergence would be so totally doomed.