The aim of the project is to develop a new single approach to lease accounting that would ensure that all assets and liabilities arising under lease contracts are recognised in the statement of financial position (balance sheet).

The project was added to the IASB’s agenda in July 2006; the project is part of the 2006 Memorandum of Understanding (updated in 2008) between the FASB and the IASB to work towards convergence.

In March 2009 the IASB, jointly with the FASB, published a discussion paper Leases: Preliminary Views. The discussion paper was open for comment until 17 July 2009.

In September 2009, the Board discussed a summary of the responses to the discussion paper. At the joint meeting with the FASB in October 2009, the Board reaffirmed the right-of-use approach for lessees and decided to develop a performance obligation approach for lessors.

In November 2009, the Board made tentative decisions on the initial and subsequent measurement of the lessee's obligation to pay rentals and right-of-use asset as well as of the lessor's receivable and performance obligation. The Board also reached a preliminary view on how the lessee and the lessor would account for lease contracts that grant the lessee the right to extend or terminate the lease.

In December 2009, the Board tentatively decided how to account for leases that include contingent rental arrangements for the lessee and the lessor and residual value guarantees for the lessee. The Board also discussed the scope of the proposed new leases requirements.

In January 2010, the Board discussed the situation when a contract is the purchase or sale of the underlying asset. The Board tentatively decided to exclude contracts that represent the purchase or sale of the underlying asset from the scope of the proposed new leases requirements at a previous meeting. The Board also discussed how to measure leases after initial recognition with options and contingent rentals under the amortised cost-based approach, whether to provide a concession for short-term leases and how to account for investment properties held by lessors.

In February 2010, the Board reached preliminary views on:

• How to account for changes in contingent rentals
• How to determine when contracts are purchases or sales of the underlying asset in the context of a lease contract
• Transitional provisions for the proposed new leases requirements for lessees
• The definition of the interest rate implicit in the lease
• The definition of initial direct costs.

Detailed summary of tentative decisions reached to date can be found at IASB Meeting Summaries and Observer Notes.

The Board will continue its discussion of both lessee and lessor accounting issues at future meetings.

In July 2006 the IASB and the FASB established a joint working group for the project to seek the views of both users and preparers of financial statements as the project progresses. The first working group meeting was held in February 2007.

The last meeting of the working group took place on 3 September 2009. At that meeting the group provided feedback on a lessor accounting model and other lessee accounting issues.

Click here for more information on the joint working group.