Leases - Fasb vs Iasb Comparison

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Introduction Leasing is a global business and differences in accounting standards can lead to significant problems in comparability. A universal standard would be needed to provide the consistency required. The joint IASB-FASB project added the topic of lease accounting to the project list in July 2006 as part of the convergence to IFRS. The goal of this project was to create an approach to improve accounting for leases using the conceptual framework definitions of assets and liabilities. Both U.S. GAAP and IFRS currently have standards for lease accounting, which have many similarities, and also some differences. This paper will discuss the history of the two standards and provide the components of each standard. The differences are analyzed and a recommended convergence standard is provided. Background U.S. GAAP The accounting standards for leases in the United States started in 1949 with ARB 38 Disclosure of Long-Term Leases in Financial Statements of Lessees issued by the AICPA. Several additional documents were put into place over the years, as referenced in Table 1 below. This ultimately led to the adoption of FAS 13 Accounting for Leases by the FASB, which is used today. Before FAS 13 was adopted, the Securities and Exchange Commission (SEC) had gotten involved and initiated the subject of improving accounting standards for leasing. This is evidenced in a speech made by former Chairman of the SEC, G. Bradford Cook in which he stated “The accounting profession has probably failed to keep up with the phenomenal growth and complexity of lease arrangements.” In addition, a speech by the Associate Director of the SEC San Francisco office, L. Rosen stated that “The accounting profession should be concentrating on building new principles while reinforcing old bridges with additional disclosure.” (Palmon, 2009) The SEC not only initiated the

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