IPSASB consults on updates to lease accounting

8 Feb 18

The International Public Sector Accounting Standards Board is asking for feedback on proposed updates to its requirements for lease accounting. 

This follows publication in January 2016 of International Financial Reporting Standard 16, Leases, which replaced an earlier standard (IFRS 17). As the IPSASB aims to converge as closely as possible with IFRS where appropriate, it is proposing updating its own guidance on leases as a consequence.

Exposure draft 64 proposes the introduction of a single right-of-use model for lease accounting to replace the current risks and rewards incidental to ownership model in the current standard.

However, unlike IFRS 16, this model would apply to both lessors and lessees rather than just lessees.

Joao Fonseca, a technical manager at IPSASB, told PF: “Convergence with IFRS 16 for lessor accounting would give rise to a number of practical issues that are more common in the public sector.

“For example, consolidation issues where the lessor and lessee are part of the same economic entity and separate records need to be maintained for the underlying asset and lease receivable.

“Another example is the creation of asymmetrical information in the public because of different recognition criteria for the same transaction. This would distort the analysis of the financial position of public sector entities.”

The IPSASB is also proposing public sector specific guidance on leases at below market terms, which are known as “concessionary leases”, thereby filling a gap in IPSASB literature.

IPSASB chair Ian Carruthers said: “Leases, including concessionary leases, are very important financing mechanisms in the public sector and in international organisations.

“The proposals in [the exposure draft] will provide better information on the financial impacts of leases and therefore enhance both the accountability of an entity for its management of resources and improve the quality of information for decision-making.” 

The exposure draft is open for public comment until 30 June. More detail on the proposed updates can be found on the IPSASB website.


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