The March 2014, Issue 14 of KPMG ISG's IFRS Newsletter: Leases - Divergent Paths summarizes the March meeting of the FASB and the IASB at which the Boards could not agree on how lessees and lessors should depict leasing activities for financial reporting purposes. Both Boards remain committed to an approach that requires on-balance-sheet recognition of leases by lessees.
The IASB decided that lessees should apply a single lease accounting model under which all leases within scope would be treated as the purchase of an asset on a financed basis. Conversely, the FASB decided that lessees should apply a dual lease accounting model under which many leases would qualify for straight-line recognition of total lease expense without separate presentation of interest expense.
The Boards decided to eliminate many aspects of the lessor accounting proposals from the 2013 EDs and to replace them with requirements based on IAS 17, Leases. The IASB decided to exempt small-ticket leases from the proposals even if the effect is material in aggregate, but the FASB decided not to provide this exemption. The Boards also decided to expand the scope of the short-term lease exemption, and to introduce other targeted simplifications.