Why Did The Fasb Embark On A Project Change The Reporting Standard For Leases?

The FASB mission statement states, “that it is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities and provides decision-useful information to investors and other users of financial reports. That mission is accomplished through a comprehensive

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

C. In a sales-type lease the carrying value of the asset is charged to cost of the asset leased (expense), and the present value of the minimum lease payment as the amount of the sale. For direct financing leases no sales or expense is recognized because the asset is removed from the books. The difference between its carrying value and the undiscounted minimum lease payments is recorded as unearned interest revenue. The net investment in a sales type lease ia accounted for in a similar manner as a direct financing

Wide range of entities will be impacted by the introduction of AASB 15, especially in the industry of construction, manufacturing, telecommunications and real estate (Moore Stephens Australia, 2015). While Deloitte (2016) stated that many companies may face a challenging implementation as AASB could not only impact an organisation’s financial reporting, but also may have changes to existing processes, internal controls and other business elements. For Lend lease, many impacts might be arisen on transaction as it is a construction company. The first one can be concluded that by adopting AASB 15, construction companies like Lend lease can bring revenue forward. An example of AASB 15 may result in revenue being recognised earlier than existing accounting standard is where the construction contract includes an award bonus. AASB 15 will include the bonus from the

The FASB mission is to establish and improve financial accounting standards and reporting. This sets the guidance for nongovernmental entities that provide decision-useful information to users. Users include issuers, auditors, and other users of financial information.

Research: The Financial Accounting Standards Board (FASB) was founded in 1973 as a private and independent organization governed by the Securities Exchange Commission (SEC). The organization’s primary purpose is to establish the rules and standards of Generally Accepted Accounting Principles (GAAP) for the interest of the public. (“Facts about FASB”) “Since its inception in 1973, the FASB has issued 168 Statements of Financial Accounting Standards and a series of concepts statements”. (Facts about FASB, n.d.) The FASB's mission is "to establish and improve standards of financial accounting and reporting for the guidance and education of the public,

The purpose of this paper is to examine and discuss ASC 840 Leases specifically Capital, Operating and Sale-Leaseback summarizing the essential components of the standard including recognition, measurement, subsequent measurement, financial, political, and economic impact for the company and its investors.

The FASB mission is to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernment entities that provides decision- useful information to investors and other users of financial reports.” (www.FASB.org)

FASB Accounting Standards Codification (ASC) 840-10-15 outlines the scope and scope exceptions for the Leases topic. ASC 840-10-15-6c provides the guidance to what constitutes a lease, and therefore governed under this topic.

In terms of accounting implications, I would say this provide a better way for accountants report operating leases and evaluate other companies which they have an interests in, such as investing, acquiring, or lending. Overall, I believe that article was concise and it cover all the points that will effect

When accounting for leases, an operating lease records no asset or liability on the financial statements and the amount paid is expensed as it is incurred. On the other hand, a capital lease is recorded as both an asset and a liability on the financial statements and

According to Hans Hoogervorst, Chairman of the IASB, there was a significant need for an improved leasing standard. (2)(16) The limitations of AASB 117 were as follows. Companies were unable to accurately assess the risk of potential future leasing transactions as a majority of leases were not reported on a lessee’s balance sheet (1). In order to address this issue, the new standard proposes changes to how lessors would account for leases that are not on the balance sheet (1). Under AASB 117, investors are making rough inaccurate estimates as to the hidden leverage from leasing. (2) With nearly all leases now appearing on the balance sheet with the new standard, the quality, accuracy and transparency of financial reporting will improve significantly (2) (1)

Why do you think the two regulatory bodies changed the lease reporting requirements? The principal reason for accounting boards to make standards is to provide protection for public users. They felt like the previous guidelines for leases were not telling a complete story of a company’s financial health. Companies could sneak in lease agreements in the footnotes where it is easier to hide. Now the agreements will be more easily seen.

The current IAS 17 shows some defects in practice after issued, and the main defects are mainly consist by poor transparency caused by off balance sheet accounting. Therefore, IFRS was trying to promote the performance of IAS 17 by issued discussion paper and exposure draft since 2009 (ICAEW, 2015). To deal with the off-balance-sheet-accounting 2010 ED intended to eliminate the difference between finance and operating leases that means “all lease give rise to liabilities for future rental payments and a right to use the underlying asset that should be recognised in an entity’s statement of financial position.” (ICAEW, 2015) However, the proposal in 2010 ED would cause new issues like nominal loss, lease industry shrinking. Therefore, 2013 exposure draft modifies the right of use approach by introducing Type A and Type B leases. Generally the changes of 2013 ED took on the identify approach, new definition on underlying asset, and thus affect lessees account and lessors account.