KPMG’s CFO Financial ForumFinancial Forum Webcast FF... · Simplified requirements for some short...

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KPMG’s CFO Financial ForumFinancial Forum WebcastOverview of the Revised FASB/IASB Lease Accounting Exposure Drafts

June 13, 2013

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Defining Issues

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1

Issues In-Depth

FASB/IASB LEASES PROJECT

2

Agenda

Overview of proposals

Lease definition and classification

Lessee accounting Lessee accounting

Lessor accounting

Other issues

Appendix – Presentation, disclosure, and transition considerations



Overview of ProposalsOverview of Proposals

3

Leases for Lessees

May 16, 2013:ED published and comment period begins

Leases on balance sheet

Dual lease model: accelerated (Type A) or straight-line (Type B) expense pattern

Overview

Proposed date of

Lease classification tests based on nature of asset (property / non-property) and extent of consumption by lessee during lease term

Simplified requirements for some short term leases ≤ 12 months

More disclosure of leasing arrangements

Right-of-use (ROU) asset and lease liability recognized at lease commencement

Initially recognize and measure lease liability based on

How to apply the standardProposed date of transition

September 13, 2013:Comment period ends



adoption

Earliest annual financial statements in which proposals would apply

Initially recognize and measure lease liability based on expectations about lease term, purchase options, residual value guarantees, etc., and monitor / reassess each reporting period

Lease liability subsequently measured at amortized cost; carrying amount modified for certain reassessments

ROU asset subsequent measurement and expense recognition depends on lease classification

Leases for Lessors

Dual lease model: partial sale (Type A) or operating lease-like (Type B) accounting

Lease classification tests same as those that apply to lessees

OverviewMay 16, 2013:ED published and comment period begins

More complex accounting requirements

Simplified requirements for some short term leases ≤ 12 months

More disclosure of leasing arrangements

Type A Receivable and Residual (R&R) model similar to partial sale accounting; at lease commencement derecognize underlying asset and recognize:

a lease receivable (PV of estimated future lease payments)

How to apply the standard

Proposed date of

Proposed date of transition

September 13, 2013:Comment period ends



a lease receivable (PV of estimated future lease payments)

a residual asset

upfront profit or loss in some cases

interest income on lease receivable and income on accretion of residual asset over the lease term

Type B operating lease model similar to current operating lease accounting

adoption

Earliest annual financial statements in which proposals would apply

4

Polling Question #1

Which of the following is correct regarding Type A leases?

A. Only lessees would have Type A leases

B. Only lessors would have Type A leases

C. The pattern of lease income and expense would be accelerated for Type A leases

D. The pattern of lease income and expense would be straight-line for Type A leases


Polling Question #1 – Answer

The correct answer is C.

Choices A and B are incorrect because Type A lease classification would l t b th l d l Ch i D i i t b th t i htapply to both lessees and lessors. Choice D is incorrect because the straight-

line pattern of income and expense would apply to Type B leases rather than Type A leases.


5

Type A Leases

Lessor‘Receivable and residual’

(R&R) Model

Lessee‘Accelerated ROU’

Model

Right to use underlying

asset

(R&R) Model

ROU assetRight to use

underlying asset during lease

Lease liabilityObligation to make future

l t

Lease payments

Residual assetRight to return of underlying asset at end of lease

Lease receivable

Right to receive future lease



gterm

lease paymentstermpayments

Subsequent measurement of the lessee’s ROU asset would be at cost less amortization and the lessee would also recognize interest expense.

Type B Leases

Lessor‘Operating Lease’

Model

Lessee‘Straight-Line ROU’

Model

Right to use underlying

asset

ROU assetRight to use

underlying asset during lease

Lease liabilityObligation to make future

l t

Lease payments

Underlying asset

No derecognition of underlying



gterm

lease paymentsy g

asset

Lease income/expense recognized generally on a straight-line basis

Subsequent measurement of the lessee’s ROU asset = a “plug” number

6

Lease Definition and Classification

Lease Definition

A contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

Definition focuses on control of an identified asset.

Within scope

Leases with service components

Short-term leases (≤

Scope with exceptions Outside scope

Contracts that meet the definition of a lease:

Leases of assets

Long leases of land

Sale-leasebacks

Leases of:

Intangibles (other than ROU assets)



(12 months)

Sale-leasebacks

Subleases

In-substance purchases / sales

Leases of inventory

Natural resources and exploration

Biological assets

7

Polling Question #2

Which of the following would qualify as a short-term lease?

A. A lease of a equipment for 1 month that automatically renews until canceled by the lessee

B. A lease of equipment for 12 months that includes no options to renew the lease and no purchase option

C. A lease of equipment for 10 months, without any renewal options, that includes an option for the lessee to purchase the equipment at fair market value at the end of the lease term

D. A lease of equipment for 15 months that can be terminated after 1 month without penalty



The correct answer is B.

The lease in option B has a maximum possible term of 12 months or less. O ti A d D h d i ibl t f > 12 th Th l iOptions A and D had a maximum possible term of > 12 months. The lease in option C contained a lessee purchase option so would not qualify as a short-term lease regardless of the maximum possible lease term or the likelihood that the purchase option would be exercised.


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Lease Definition (continued)

A contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

Definition focuses on control of an identified asset.

Supplier cannot substitute an asset

Asset must be physically distinct – applies to distinct portions but not generic capacity

Use of identified

asset


Ability to make decisions that most significantly affect economic benefits derived from use

Ability to derive substantially all of the potential economic benefits throughout contract term

Right to control use


Agreements with Lease and Non-Lease Components

Lessee Lessor

When there is an observablef

Separate and allocate Always separate and standalone price for each component

based on relative standalone price of components

allocate using the revenue recognition standard’s guidance (i.e., on a relative selling price basis) When there is an observable

standalone price for one or more, but not all, components

Separate and allocate using the residual method

When there is not an observablet d l i f f th

All lease

15© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

standalone price for any of the components in the arrangement

Assets incidental to the delivery of specified services

All service


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Lease Classification Tests

Is the underlying asset property(land and / or a

building)?No Yes

Lease term for a major part of the remaining economic life; or

building)?

Type A lease* Type B lease*

Unless Unless

Lease term for an insignificant part of the total economic life; or


PV of the lease payments amounts to substantially all FV of underlying asset

PV of the lease payments insignificant compared to FV of underlying asset

* If the lease includes a purchase option that the lessee has a significant economic incentive to exercise, it would always beclassified as a Type A lease.


Classification – Example

Fact pattern for example:

Lease of equipment

Lease term 3 years

Total economic life of equipment 10 years

Present value of minimum lease payments $ 37,500

Fair value of equipment $100,000

No renewal or purchase option / title transfer in lease agreement


ED’s Proposals – Type A Lease

Lessee: Accelerated ROU Model

Lessor: R&R Model

ASC 840

Lessee: Operating lease

Lessor: Operating lease


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Classification – Lease Components with Multiple Underlying Assets

Primary asset

Applicable lease term test based on life of primary asset Primary asset – predominant asset for which the lessee

t d i t th t t

Property vs

entered into the contract Non-primary assets – enable lessee to obtain benefits of

the primary asset

Land and building = single item

No allocation of payments between land and building

vs Non-property

L d d


p y g Economic life of building = economic life of property for lease

term test In some cases may result in lease income/ expense

recognized on an accelerated basis

Land and building


Classification of Lease with Multiple Underlying Assets – Example


Lease of laboratory (integral) equipment, laboratory building, and underlying land

Underlying assets comprise a single lease component

Laboratory equipment is primary underlying asset

Lease term 5 years

Total economic life of laboratory equipment 10 years

Remaining economic life of building 25 years

Present value of minimum lease payments $ 375,000

Fair value of underlying assets in aggregate $1,000,000

No rene al or p rchase option / title transfer in lease agreement


No renewal or purchase option / title transfer in lease agreement

ED’s Proposals – Type A Lease

Lessee: Accelerated ROU Model

Lessor: R&R Model

ASC 840

Lessee: Operating lease

Lessor: Operating lease


11

Polling Question #3

Lessee leases two items of equipment and obtains consulting services from Lessor. How many separate components (lease and/or non-lease) are there from Lessee’s perspective in this contract if neither item of equipment, nor the consulting services are sold separately by Lessor or any other supplier?consulting services, are sold separately by Lessor or any other supplier?

A. One

B. Two

C. Three

D. It depends.


p


The correct answer is A.

The ED states that a lessee can only separate lease and non-lease t f hi h it h b bl t d l i (i b dcomponents for which it has an observable standalone price (i.e., based on

the standalone pricing of the lessor or another supplier). In this case, because there is not an observable standalone price for either item of equipment or the consulting services, Lessee would be required to treat the entire contract as a single lease component.


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Lessee AccountingLessee Accounting

Lease Liability – Initial Measurement

PV of future lease payments includes expectations about:

Purchase options

Lease term

Termination penalties

RV guarantees

Variable lease payments (VLPs)

Discount rate


■ Exercise price of options included if significant economic incentive to exercise

■ VLPs included only if based on a rate or index, or in-substance fixed

■ Residual value guarantees (RVGs): amount expected to be payable


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Changes in carrying amount of lease liability due to:

Amortized cost using the effective interest method; no fair value option

Lease Liability – Subsequent Measurement and Reassessments

Reassessment of lease term, purchase options and RVGs

Related to future periods

Reassessment of VLPs based on an index or rate

Related to current period


Adjust right-of-use asset Recognize in P&L

Discount rate is reassessed unless change in liability relates solely to RVGs and/or VLPs based on a non-interest-rate index.


ROU Asset – Initial and Subsequent Measurement

Initially measured as the sum of:

LLInitial Initial Lease Lease PrepaidPrepaidLease

liabilityLease

liabilitydirect costsdirect costs

incentives received

incentives received

Prepaid lease

payments

Prepaid lease

payments

Subsequent measurement:

Accelerated ROU Model (Type A Leases)

■ Amortized generally on a straight-line basis over shorter of lease term or economic life of ROU asset

T th ith i t t lt i f t l di f t t l

Accelerated ROU Model (Type A Leases)

■ Amortized generally on a straight-line basis over shorter of lease term or economic life of ROU asset

T th ith i t t lt i f t l di f t t l


– Together with interest expense results in front loading of total expense

■ ASC 360 impairment testing

– Together with interest expense results in front loading of total expense


Straight-Line ROU Model (Type B Leases)

■ Amortized as a plug amount to produce straight-line total expense when combined with interest on lease liability

– Not amortized when straight-line total expense would be less than interest on lease liability


Straight-Line ROU Model (Type B Leases)

■ Amortized as a plug amount to produce straight-line total expense when combined with interest on lease liability

– Not amortized when straight-line total expense would be less than interest on lease liability



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Example – Lessee Accelerated ROU Model (Type A Lease)

Fact pattern: Lessee enters into lease for a 5 year lease term that is accounted for under the accelerated ROU model. The lessee pays $155 per year in arrears. The rate the lessor charges the lessee is 6%.

Statement of financial position Profit or loss

Period CashROU Asset

Lease liability Amortization

Interest expense

Total expense

Commencement $655 $655 $ - $ - $ -1 $155 524 539 131 39 1702 155 393 416 131 32 163


3 155 262 285 131 24 1554 155 131 147 131 17 1485 155 - - 131 8 139

Total $775 $655 $120 $775


Example – Lessee Straight-Line ROU Model (Type B Lease)

Statement of financial iti P fit l

Fact pattern: Same as previous slide, but assume straight-line ROU model applies and $405 impairment of ROU asset at beginning of year 3.

position Profit or loss

Period CashROU asset Lease liability

Lease expense

Impairment expense

Commencement $655 $655 $ - $ -1 $155 539 539 155 -2 155 416 416 155 -3 155 11 285 24 4054 155 10 147 18 -5 155 - - 18 -


Total $775 $370 $405

Periodic lease expense is the greater of (a) total remaining noncontingent lease payments allocated over the remaining lease term on a straight-line basis (regardless of timing of payments), or (b) the interest cost on the lease liability. The ROU asset is measured as a plug after initial recognition.


15

Polling Question #4

Which of the following is not included in the lessee’s initial measurement of its lease liability?

A. Expected payments under residual value guarantees

B. Variable lease payments based on use or performance

C. Exercise price of a purchase option that the lessee has a significant economic incentive to exercise

D. Variable lease payments based on an index or rate



The correct answer is B.

The lessee’s initial measurement of its lease liability would include items A (estimated payments related to residual value guarantees), C (the exercise price of a purchase option that the lessee has a significant economic incentive to exercise) and D (variable lease payments that are based on an index or rate using the spot index or rate at the measurement date). The lessee’s initial measurement of its lease liability would not include variable lease payments that are based on the lessee’s future use of the underlying asset or its performance (e.g., sales of a store in a leased retail space).


16

Lessor AccountingLessor Accounting

Receivable and Residual Model (Type A Leases)

PV of estimated future lease

Lease receivable

Gross residual asset

Plus (+)

Net residual asset

payments

Plus (+)

Initial direct costs

Plus (+)

PV of estimated VLPs

Less (-)

Unearned profit

Gross residual asset = PV of estimated future residual value discounted at lessor discount rate


Unearned profit = (FV of leased asset – carrying amount of leased asset) × (1 – [PV of lease payments ÷ FV of leased asset])


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Receivable and Residual Model (Type A Leases) – Initial Profit or Loss

Upfront profit/loss:(Fair value – carrying amount of leased asset) × PV of lease payments ÷ FV of leased asset

Unearned profit/loss:(Fair value – carrying amount of leased asset) × [1 – (PV of lease

Profit / Loss


leased asset) × [1 (PV of lease payments ÷ FV of leased asset)]


Changes in carrying amount of lease receivable due to:

Amortized cost using the effective interest method; no fair value option

Lease Receivable – Subsequent Measurement and Reassessments

Reassessment of lease term and purchase options

Reassessment of VLPs based on an index or rate


Adjust residual asset Recognize in P&L

Discount rate is reassessed unless change in lease receivable relates solely to VLPs based on a non-interest-rate index.


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Example – Lessor Receivable and Residual Model (Type A Lease)


Lease term 5 years

Total economic life of leased asset (equipment) 15 years

Estimated future residual value at end of year 5 $ 75,000

Present value of estimated future residual $ 44,719

Fair value of leased asset $230,000

Carrying amount of leased asset $200,000

Rate lessor charges lessee 10.896%


Annual payments in arrears $ 50,000

Present value of lease payments $185,281


Example – Lessor Receivable and Residual Model (continued)

Net residual asset components:

Gross residual asset: $44,719

Unearned profit: (5 833)

Fact pattern

Estimated future residual value

$ 75,000

Unearned profit: (5,833)

■ Calculation of net residual asset:

Gross residual asset: $44,719

Unearned profit: (5,833)

Net residual asset: $38,886

■ Calculation of unearned profit:

Present value of estimated future residual

$ 44,719

Fair value of leased asset $230,000

Carrying amount of leased asset

$200,000

Present value of lease payments

$185,281


– Total profit less profit recognized at lease commencement (i.e., day 1 profit) = (fair value – carrying amount of the leased asset) × [1 – (present value of lease payments ÷ fair value of the leased asset)]

– ($230,000 – $200,000) × [1 – ($185,281 ÷ $230,000)] = $5,833


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Period

Lease receivable

Gross residual

assetUnearned

profitNet residual

assetDay 1 profit

Interest income

Gross residual

accretionNet

income0 $185 281 $44 719 $(5 833) $38 886 $24 167 $ $ $ 24 167


0 $185,281 $44,719 $(5,833) $38,886 $24,167 $ - $ - $ 24,167 1 155,468 49,591 (5,833) 43,758 - 20,187 4,872 25,059 2 122,408 54,994 (5,833) 49,161 - 16,940 5,403 22,343 3 85,745 60,986 (5,833) 55,153 - 13,337 5,992 19,329 4 45,087 67,631 (5,833) 61,798 - 9,342 6,645 15,987 5 - 75,000 (5,833) 69,167 - 4,913 7,369 12,282

Totals $24,167 $64,719 $30,281 $119,167

Day 1 profit:G id l ti 1


Unearned profit not recognized until asset is sold or re-leased

Day 1 profit:

(Fair value – carrying amount of the leased asset) × present value of lease

payments ÷ fair value of the leased asset

($230,000 – $200,000) × $185,281 ÷$230,000 = $24,167

Gross residual accretion year 1:

$44,719 × 10.896% = $4,872




Period

Lease receivable

Gross residual

assetUnearned

profitNet residual

assetDay 1 profit

Interest income

Gross residual

accretionNet

income0 $185 281 $44 719 $(5 833) $38 886 $24 167 $ $ $ 24 167

Net income – R&R model: Net income – ASC 840 operating lease:

0 $185,281 $44,719 $(5,833) $38,886 $24,167 $ - $ - $ 24,167 1 155,468 49,591 (5,833) 43,758 - 20,187 4,872 25,059 2 122,408 54,994 (5,833) 49,161 - 16,940 5,403 22,343 3 85,745 60,986 (5,833) 55,153 - 13,337 5,992 19,329 4 45,087 67,631 (5,833) 61,798 - 9,342 6,645 15,987 5 - 75,000 (5,833) 69,167 - 4,913 7,369 12,282

Totals $24,167 $64,719 $30,281 $119,167


$119,167 – Net income5,833 – Unearned profit

$125,000 – Total income

Accelerated income recognition

$ 250,000 – Total lease payments(125,000) – Total depreciation exp.

$ 125,000 – Total income

Net income per year = $25,000


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Polling Question #5

Which of the following is not true for the lessor in applying the receivable and residual model?

A. The lessor would derecognize the carrying amount of the underlying asset at lease tcommencement

B. The lessor would record a gross residual asset at lease commencement reflecting the present value of the amount the lessor expects to derive from the underlying asset after the end of the lease term

C. The lessor would record a performance obligation liability at lease commencement reflecting its obligation to provide the lessee with access to the underlying asset throughout the lease term


D. The lessor would record a lease receivable at lease commencement at the present value of the lease payments discounted at the rate the lessor charges the lessee


The correct answer is C.

The lessor would derecognize its underlying asset at lease commencement (Item A) and would record both a lease receivable (Item D) and a gross residual asset (Item B) at lease commencement. A lessor applying the R&R model would not record a performance obligation liability (Item C) at any point during the lease under the ED’s proposals (a lessor would have recorded such a liability under one of the two lessor accounting approaches proposed in the 2010 leases exposure draft)


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Operating Lease Model (Type B Leases)

■ Lessor does not recognize a

Financial Position

■ Lease income is recognized

Profit or Loss

financial asset

■ Underlying asset remains on lessor's balance sheet

■ Lease income is recognized generally on a straight-line basis

■ No interest income recognition

■ Lessor total lease income may differ from lessee total lease expense under straight-line ROU model if differing assumptions about lease term, purchase options etc


options, etc.

■ Lessor's recognized underlying asset (not a financial asset) ≠ lessee’s recognised financial liability


Other IssuesOther Issues

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Subleases

Head Lessor Apply lessor accounting requirements

Head lessee / Intermediate lessor

Apply lessee accounting requirements for head lease and lessor accounting requirements

for sublease – present gross*



Sublessee Apply lessee accounting requirements*

* Sublease classification based on underlying asset, not ROU asset.

Sale-Leaseback Transactions

The sale/transfer meets the new revenue recognition

requirements to be a sale of the underlying asset

The sale is recognized in

accordance with li bl GAAP

The purchase is recognized in

accordance with li bl GAAP

Buyer-lessor

Seller-lessee

underlying asset

Leaseback

applicable GAAP applicable GAAP

Sale



The leaseback is accounted for in accordance with the right-of-use

model for lessees

Each component of the transaction

is assessed separately

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Polling Question #6

A seller-lessee sells an asset to a buyer-lessor and agrees to lease it back from them, which of the following would not preclude the seller-lessee from recording the initial sale?

A. The leaseback term is for a major part of the underlying asset’s remaining economic life

B. The present value of the leaseback payments accounts for substantially all of the fair value of the underlying asset

C. The seller-lessee has the unconditional right to repurchase the asset during the leaseback term

D. The sale price of the underlying asset to the buyer-lessor is below fair market value


D. The sale price of the underlying asset to the buyer lessor is below fair market value


The correct answer is D.

Each of the first three items (A-C) would preclude the seller-lessee from derecognizing the underlying asset and accounting for the transaction as a sale-leaseback. Sale of the asset to the buyer-lessor at a price that is below fair market value would not, in isolation, prevent the seller-lessee from concluding that it transferred control of the underlying asset to the buyer-lessor; however, the fact that the sale price is below fair value would impact both parties’ accounting for the sale-leaseback transaction.


24

Question & Answer Session

Presenters’ contact details

Kimber K. [email protected]

Scott A [email protected]

CFO Financial Forum Webcast: FASB/IASB Revised Lease Accounting E D ft D fi iti f L d L Cl ifi ti


Exposure Drafts: Definition of a Lease and Lease Classification Webcast – 6/13/13 – 1:30 pm

http://www.kpmginstitutes.com/financial-reporting-network/events/cfoweb-6-13-2013-definition-lease-classification.aspx

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Appendix – Presentation, Disclosure and TransitionDisclosure, and Transition Considerations

Presentation – Accelerated Model (Type A Leases)

LessorsLessors LesseesLessees

■ Lease assets presented as a single■ Lease assets presented as a single ■ ROU asset presented in the SFP as■ ROU asset presented in the SFP as■ Lease assets presented as a single caption in the SFP; separate presentation of receivable and residual on the face or in the notes

■ Lease income separately presented in the SCI or in the notes

■ Gross or net presentation of profit (loss) at lease commencement

■ Lease assets presented as a single caption in the SFP; separate presentation of receivable and residual on the face or in the notes

■ Lease income separately presented in the SCI or in the notes

■ Gross or net presentation of profit (loss) at lease commencement

■ ROU asset presented in the SFP as

if owned; generally as PPE

■ ROU assets and lease liabilities

segregated either on the face of the

SFP or in the notes

■ Separate presentation in the SCI of

interest expense and amortization





SFP or in the notes

■ Separate presentation in the SCI of



depending on lessor’s business model

■ Accretion of gross residual asset presented as interest income

depending on lessor’s business model

■ Accretion of gross residual asset presented as interest income


of ROU asset


of ROU asset


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Presentation – Straight-Line Model (Type B Leases)


■ Continue to recognize underlying■ Continue to recognize underlying ■ ROU asset presented in the SFP as■ ROU asset presented in the SFP as■ Continue to recognize underlying asset in SFP

■ Total lease income recorded in a single line item caption in the SCI

■ No recognition of interest income

■ Continue to recognize underlying asset in SFP

■ Total lease income recorded in a single line item caption in the SCI

■ No recognition of interest income





SFP or in the notes

■ Interest expense and amortization of ROU asset presented as a single





SFP or in the notes

■ Interest expense and amortization of ROU asset presented as a single


lease expense in the SCIlease expense in the SCI


Presentation – Statement of Cash Flows


■ All cash inflows classified as■ All cash inflows classified as ■ All cash outflows under straight-line■ All cash outflows under straight-line■ All cash inflows classified as operating, regardless of lease classification

■ All cash inflows classified as operating, regardless of lease classification

■ All cash outflows under straight line model classified as operating

■ Cash outflows under accelerated model classified as follows:

– payments on principle – financing

– payments on interest – operating

■ Cash outflows for variable lease

■ All cash outflows under straight line model classified as operating

■ Cash outflows under accelerated model classified as follows:

– payments on principle – financing

– payments on interest – operating

■ Cash outflows for variable lease


payments and short term leases classified as operating

■ Supplemental disclosure for noncash acquisition of ROU asset in exchange for lease liability

payments and short term leases classified as operating

■ Supplemental disclosure for noncash acquisition of ROU asset in exchange for lease liability


27

Disclosures


■ Separate reconciliations of opening■ Separate reconciliations of opening ■ Reconciliation of the opening and■ Reconciliation of the opening and■ Separate reconciliations of opening and closing balances of lease receivable and residual asset

■ Table of all lease related income recognized, including from VLPs

■ Maturity analysis of gross undiscounted future lease payments segregated by lease classification and reconciled to

■ Separate reconciliations of opening and closing balances of lease receivable and residual asset

■ Table of all lease related income recognized, including from VLPs

■ Maturity analysis of gross undiscounted future lease payments segregated by lease classification and reconciled to

■ Reconciliation of the opening and closing balances of the total liability to make lease payments segregated by lease classification

■ Maturity analysis of gross undiscounted lease liability reconciled to liability recognized in SFP and commitments for non-lease components related to leases

■ Reconciliation of the opening and closing balances of the total liability to make lease payments segregated by lease classification

■ Maturity analysis of gross undiscounted lease liability reconciled to liability recognized in SFP and commitments for non-lease components related to leases


lease receivable recognized in SFP for Type A leases

■ Qualitative information about lease contracts and significant judgments including purchase options

lease receivable recognized in SFP for Type A leases

■ Qualitative information about lease contracts and significant judgments including purchase options

lease components related to leases

■ Expense from VLPs not included in the lease liability

■ Qualitative information about lease contracts and significant judgments

lease components related to leases

■ Expense from VLPs not included in the lease liability

■ Qualitative information about lease contracts and significant judgments


Transition


■ Option to apply a fully retrospective transition ■ Option to apply a fully retrospective transition ■ Option to apply a fully retrospective transition approach

■ Option to apply a fully retrospective transition approach

approach

■ Option to apply a modified retrospective transition approach resulting in:

– Carryover basis measurement for previous sales-type or direct financing leases

– Use of hindsight when preparing comparative financial information

– No evaluation of initial direct costs

approach


– Carryover basis measurement for previous sales-type or direct financing leases



approach


– Carryover basis measurement for previous capital leases



– Simplified approach for determining amount of ROU asset

approach


– Carryover basis measurement for previous capital leases



– Simplified approach for determining amount of ROU asset


■ Discount rate at transition would be the rate determined at lease commencement

■ Cumulative effect adjustment recognized in opening retained earnings

■ Disclose transition options used

■ Discount rate at transition would be the rate determined at lease commencement



– Discount rate at transition that represents the incremental borrowing rate at effective date for portfolios of leases



– Discount rate at transition that represents the incremental borrowing rate at effective date for portfolios of leases




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KPMG’s CFO Financial ForumFinancial Forum Webcast FF... · Simplified requirements for some short...

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Transcript of KPMG’s CFO Financial ForumFinancial Forum Webcast FF... · Simplified requirements for some short...