Page 13 - pwc-lease-accounting-guide_Neat
P. 13

Introduction



                       The dual model does not affect a lessee’s initial recognition of assets and liabilities on its balance sheet,
                       but differentiates how a lessee should recognize lease expense in the income statement. The
                       accounting for lessors is largely unchanged under the FASB and IASB models.

                       The following table includes a description of some of the most significant differences between the
                       guidance in ASC 842 and IFRS 16.

                       Figure 1-1
                       Summary of key differences between ASC 842 and IFRS 16


                        Topic                  Difference

                        Lessee accounting      ASC 842 requires a lessee to classify a lease as either a finance or
                                               operating lease. Interest and amortization expense are recognized for
                                               finance leases while only a single lease expense is recognized for
                                               operating leases, typically on a straight-line basis.
                                               Under IFRS 16, lessees will account for all leases in a manner similar to
                                               finance leases.


                        Lessor accounting      Under ASC 842, a sale and related profit are recognized upon the
                                               commencement of a lease only when the arrangement transfers control of
                                               the underlying asset to the lessee, i.e., in a sales-type lease, but not in a
                                               direct financing lease. Also, lessors may elect to combine certain nonlease
                                               components into the related lease component.
                                               Under IFRS 16, selling profit is recognized on direct financing leases
                                               when performance obligations, defined in IFRS 15, Revenue from
                                               Contracts with Customers, have been met. Under IFRS 16, generally
                                               lessors may not combine lease and nonlease components.

                        Statement of cash flows  ASC 842 requires lessees to report the single expense associated with an
                                               operating lease as an operating activity.
                                               Under IFRS 16, lessees account for all leases similar to a financed
                                               purchase, with payments reported as a financing or operating activity in
                                               the statement of cash flows, in accordance with IAS 7, Statement of Cash
                                               Flows.


                        Remeasurement of       The initial measurement of lease-related assets and liabilities is similar
                        variable lease         under ASC 842 and IFRS 16; however, subsequent changes in lease
                        payments               payments that vary with a rate or index (e.g., rents that increase for
                                               changes in an inflation index) are accounted for differently.
                                               Under ASC 842, such changes are recognized when incurred, unless the
                                               lessee is otherwise required to remeasure the lease liability (e.g., as a
                                               result of reassessing the lease term).
                                               Under IFRS 16, lease assets and liabilities are remeasured whenever the
                                               cash flow changes.

                        Sale and leaseback     Under ASC 842, a seller-lessee would recognize the full gain from a sale
                        accounting             and leaseback transaction that qualifies as a sale.
                                               IFRS 16 limits the recognition of gains from sale and leaseback
                                               transactions.






                                                                                                             1-3
   8   9   10   11   12   13   14   15   16   17   18