The International Public Sector Accounting Standards Board® (IPSASB®) has released its Exposure Draft (ED) 64, Leases. The comment deadline is 30 June 2018.
The Exposure Draft proposes a new lease accounting model for public sector entities. ED 64 includes a single right-of-use model for lease accounting designed to replace the model in International Public Sector Accounting Standards (IPSAS) 13, Leases, the current standard. The IPSAS 13 model is a risks and rewards incidental to ownership model. ED 64 also proposes new public sector specific accounting requirements for leases at below market terms (also known as ‘concessionary leases’) for both lessors and lessees.
The accounting requirements applicable to lessees under the proposal, if adopted, would be converged with International Financial Reporting Standard (IFRS) 16, Leases. Like IFRS 16, it would require lessees to recognise a right-of-use asset and a lease liability for all leases, except for short-term leases and leases of low-value assets.
Lessors would be required to apply a right-of-use model specifically designed for public sector financial reporting. This model differs from the risks and rewards incidental to ownership model for lessors in IFRS 16 by:
- Continuing to recognise and measure the leased asset according to the applicable IPSAS
- Recognising a lease receivable and a liability (unearned revenue) as a result of the lease contract, except for short-term leases.
For lessors in concessionary leases, ED 64 proposes to measure leases at fair value. Under this proposal, if adopted in its current form, the lessor would recognise the subsidy granted to lessees as a day-one expense and revenue over the lease term. The lessee under this proposal would measure concessionary leases at fair value and recognise revenue in accordance with IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers).
The IPSASB has also released an At-a-Glance document that provides an overview and summary of ED 64.
ED 64 is available on this link. https://www.ifac.org/publications-resources/exposure-draft-64-leases
The At-a-Glance document is available on this link. http://www.ifac.org/system/files/publications/files/Exposure-Draft-64-Leases-At-a-Glance_0.pdf