As the IASB proposes changes to the international accounting standards on lease accounting, CT asks Yin Toa Lee, Ernst & Young’s partner in financial accounting advisory services, what adjustments firms should consider during the transition.
Current controversy: Under current rules, leases are divided into capital leases and operating leases with separate accounting treatment. The former typically concerns the leasing of equipment for nearly all of its economic life, where a lessee recognises the assets and liabilities on its balance sheet. For the latter, in the case of leasing of an office space for a few years, for example, there is no need to recognise the lease assets or liabilities on the balance sheet.
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