Frequently asked questions on changes to lease accounting -FAQ by the Basel Committee
Press release
The Basel Committee today issued responses to Frequently Asked Questions (FAQs) related to the changes to lease accounting promulgated by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).
In 2016, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) revised the accounting for lease transactions.1 Both standards are effective as of 1 January 2019 for calendar year-end entities, with early adoption permitted within the standards. While there are some differences between the IASB and FASB versions of the new lease accounting standards, they are consistent on the most fundamental change – they both require that most leases will be reflected on a lessee’s balance sheet as an obligation to make lease payments (a liability) and a related right-of-use (ROU) asset (an asset). The following questions arise for banks in their capacity as lessees.
FAQs on the treatment of the ROU Asset
- Most intangible assets are deducted from regulatory capital, while tangible assets generally are not. Is the lessee’s recognised asset under the new lease accounting standards (the ROU asset) an asset that is tangible or intangible?Answer: For regulatory capital purposes, an ROU asset should not be deducted from regulatory capital so long as the underlying asset being leased is a tangible asset.
- Where the underlying asset being leased is a tangible asset, should the ROU asset be included in risk-based capital and leverage ratio denominators?Answer: Yes, the ROU asset should be included in the risk-based capital and leverage denominators. The intent of the revisions to the lease accounting standards was to more appropriately reflect the economics of leasing transactions, including both the lessee’s obligation to make future lease payments, as well as a ROU asset reflecting the lessee’s control over the leased item’s economic benefits during the lease term.
- Where the underlying asset being leased is a tangible asset, what risk weight should be assigned to the ROU asset for regulatory capital purposes?Answer: The ROU asset should be risk-weighted at 100%, consistent with the risk weight applied historically to owned tangible assets and to a lessee’s leased assets under leases accounted for as finance leases in accordance with existing accounting standards.
Frequently asked questions on changes to lease accounting – FAQ issued by the Basel Committee
Frequently Asked Questions on Changes to Lease Accounting
Press Release
The Basel Committee has issued responses to a set of frequently asked questions addressing the regulatory capital implications arising from recent changes to lease accounting standards issued by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).
In 2016, the IASB and FASB introduced significant revisions to the accounting treatment of lease transactions. These standards became effective from 1 January 2019 for calendar year-end entities, with early adoption permitted. While there are certain differences between the two frameworks, both standards introduce a fundamental change by requiring most leases to be recognised on the lessee’s balance sheet through a lease liability and a corresponding right-of-use (ROU) asset.
These developments have raised important questions for banks in their capacity as lessees, particularly in relation to the regulatory capital treatment of the newly recognised right-of-use asset.
Regulatory Capital Treatment of the Right-of-Use Asset
Nature of the asset
A key consideration is whether the right-of-use asset should be classified as a tangible or intangible asset for regulatory capital purposes. The Basel Committee clarified that where the underlying leased item is a tangible asset, the associated right-of-use asset should not be deducted from regulatory capital.
Inclusion in capital and leverage calculations
Where the underlying leased asset is tangible, the right-of-use asset should be included in both risk-based capital and leverage ratio denominators. This treatment reflects the objective of the revised lease accounting standards, which seek to more accurately capture the economic substance of leasing arrangements by recognising both the obligation to make lease payments and the control over the economic benefits of the leased asset.
Risk weighting
For regulatory capital purposes, the right-of-use asset associated with a tangible underlying asset should be assigned a risk weight of 100 percent. This approach is consistent with the historical treatment applied to owned tangible assets and to leased assets previously recognised under finance lease accounting.
IPSAS Training Courses and Workshops
IPSAS Implementation and Compliance Workshops
Strengthen your knowledge of International Public Sector Accounting Standards (IPSAS) through Shasat’s specialised implementation and compliance workshops. These programs are carefully designed to help public sector professionals achieve greater excellence in financial reporting, transparency, and governance.
At Shasat, we provide tailored IPSAS training solutions that range from short, topic-focused workshops to complete implementation programs. Each course addresses the specific needs of government entities, public institutions, and state-owned enterprises. As a result, participants gain a deep and practical understanding of IPSAS adoption and application.
Moreover, our sessions offer hands-on learning through interactive exercises, group discussions, and real-world case studies. During the workshops, you will explore key areas such as:
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Understanding the differences between IPSAS, IFRS, and national standards
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Managing compliance and reporting obligations effectively
Our industry-recognised IPSAS instructors deliver every program with a focus on clarity, practical application, and current developments. Consequently, you will gain actionable insights that you can immediately apply within your organisation.
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If you would like to discuss a customised IPSAS training program for your organisation, please contact us. Our team will work with you to design a program that aligns with your specific objectives and operational challenges.
Preparación para las normas contables IFRS 9 | Bloomberg LATAM
Nuevas normas contables aprobadas por el Consejo Internacional de Normas de Contabilidad, conocidas como las IFRS 9, entrarán en vigor al comienzo de 2018. Los tesoreros corporativos han comenzado a analizar el efecto de su adopción, no sólo en su contabilidad, sino sus implicaciones para la gestión de riesgos, gravámenes, controles internos y procesos, además de evaluar si los sistemas existentes son suficientes para adaptarse a la nueva legislación.
Las normas IFRS 9 (NIIF 9, Normas Internacionales de Información Financiera) se redactaron en 2014 con el propósito de reemplazar a las normas IAS 39 (NIC 39, Normas Internacionales de Contabilidad), destinadas a aumentar la transparencia en las prácticas contables.
A principios de la década de 2000 múltiples escándalos corporativos propiciaron el surgimiento de una legislación de gran alcance que afectó los procesos de la contabilidad pública y la presentación de reportes financieros en Estados Unidos, con la introducción de la Ley Sarbanes-Oxley de 2002. Finalmente, el Consejo Internacional de Normas de Contabilidad, y su contraparte estadounidense, el Consejo de Normas para la Contabilidad Financiera, lanzaron normas contables actualizadas para los instrumentos financieros.
Las FRS 9 son importantes para los tesoreros corporativos porque rigen la forma en que se deben contabilizar los instrumentos financieros, específicamente la forma de medirlos continuamente. Las decisiones que toman los tesoreros pueden afectar el capital reglamentario y los indicadores clave de desempeño.
Desde una perspectiva amplia, hay dos clasificaciones para lo relacionado con activos financieros: los medidos a un costo amortizado y los medidos a un valor razonable.
Los instrumentos financieros y todas las inversiones de capital que cubren las IFRS 9 deben medirse a un valor razonable en el estado de situación financiera, en el que los cambios de valor se deben reconocer a valor razonable al resultado (VRR), con algunas excepciones para instrumentos patrimoniales específicos.
La medición de los instrumentos de deuda depende del modelo de negocios de la entidad para gestionar los activos financieros y las características contractuales del flujo de efectivo del activo financiero. La prueba del modelo de negocios se propone determinar las razones para mantener instrumentos financieros en el contexto de las operaciones generales y la estrategia de negocios de una entidad.
La evaluación de las características de los flujos de efectivo contractuales tiene como propósito determinar si estos son “únicamente pagos de capital e intereses sobre el saldo insoluto del capital” (criterio SPPI).
Los modelos básicos de contabilidad clasifican los pasivos financieros a valor razonable al resultado y costo amortizado. Los pasivos financieros que se mantienen para negociarse se miden a VRR (por ejemplo, derivativos) y todos los demás pasivos financieros se miden a un costo amortizado, a menos que se aplique la opción de valor razonable. En el caso de dichos pasivos, los cambios a valor justo debido al riesgo crediticio propio de la entidad deben registrarse en Utilidad Neta Integral (UNI).
Los resultados y reportes iniciales sugieren que los inversionistas perciben la nueva reglamentación como un suceso positivo que propiciará una mayor transparencia y visibilidad de las actividades de las entidades en lo relacionado con la gestión de riesgos.
Sin duda alguna, las IFRS 9 exigirán una mayor capacidad de discernimiento al aplicar la prueba de las características de flujo de efectivo contractual y la evaluación del modelo de negocios, lo que podría implicar tener que decidir cómo se calculan algunos instrumentos financieros. Esta decisión no puede tomarse a la ligera, ya que podría ocasionar una mayor volatilidad en los resultados y capital reportados, lo que podría afectar el capital reglamentario y los indicadores clave de desempeño.
Tomemos como ejemplo la industria de los seguros. Después de meses de debates, el Grupo Consultivo Europeo sobre Información Financiera llegó a la conclusión de que “en general, las IFRS 9 propiciarán el bien público en Europa, excepto por el impacto que tendrá en la industria de las aseguradoras su aplicación antes de haya quedado lista la próxima norma para contratos de seguros”. Las reglas y principios contables son más importantes que nunca y sus análisis deben realizarse con mayor cuidado, ya que las compañías tratarán de encontrar cualquier medio para defender su rentabilidad.
Las compañías tendrán que desarrollar metodologías y controles internos adecuados para garantizar que los criterios se apliquen de manera sistemática en toda la organización.
En términos generales, el modelo de clasificación y medición aumentará la capacidad de comparación internacional de la contabilización de los instrumentos financieros, además de determinar de manera más justa las políticas y estrategias de las entidades en materia de gestión de riesgos.
The IASB issued amendments to its existing insurance contracts Standard IFRS 4.
The amendments address concerns arising from implementing the new IFRS 9, before implementing the replacement Standard that the Board is developing for IFRS 4. These concerns include temporary volatility in reported results. The amendments introduce two approaches:
An overlay approach and a deferral approach.
The amended Standard will:
- give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts Standard is issued; and
- give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments Standard—IAS 39.
The amendments to IFRS 4 supplement existing options in the Standard that can already be used to address the temporary volatility. The new insurance contracts Standard is currently being drafted and will have an effective date no earlier than 2020.
IPSAS in a nutshell – Book By PwC
IPSAS in a Nutshell – From Principles to Practice
Public sector accounting is evolving. As governments worldwide strengthen public financial management frameworks, the International Public Sector Accounting Standards (IPSAS) continue to serve as the global benchmark for transparency, accountability and governance.
The updated edition of IPSAS in a Nutshell – From Principles to Practice provides a comprehensive, practical guide to IPSAS standards effective up to 31 March 2015. This edition is complemented by the companion volume IPSAS in a Nutshell – Test Your IPSAS Knowledge, enabling readers to assess and deepen their technical understanding.
Why This Book Matters
-Designed for practitioners, policymakers, government officials, auditors, and all stakeholders engaged in public sector financial reporting.
-Clear, concise and structured explanations of complex accounting concepts.
-Practical insights and implementation tips derived from real-world IPSAS application experience.
-Approximately 260 pages covering current developments and operational implications of IPSAS adoption.
-200 structured Q&A exercises across two difficulty levels to reinforce technical mastery.
Authors:
-Patrice Schumesch
-Anton De Greef
-Jan De Laet
PwC Global survey on accounting and reporting by central governments 2nd edition
Towards a new era in government accounting and reporting
The global financial crisis and the subsequent sovereign debt crisis have brought to light that the lack of transparency in public finances and poor public finance management may put at risk governments’ ability to service large public debts and meet their welfare commitments and other public service delivery objectives. There is now growing recognition of the importance of appropriate accounting and financial management in the public sector as a key means of achieving sustainable public finances. Governments need to step up and adopt sound and transparent accounting and reporting rules, as part of the democratic accountability process and the wider public finance management.
Follow the below link to read the entire survey document:
https://www.pwc.be/en/publications/pdf/global_ipsas_survey_2015.pdf
Amendments to the revenue standard—IFRS 15
Amendments to the revenue standard—IFRS 15
The IASB issued an amendment to the revenue Standard, IFRS 15 Revenue from Contracts with Customers, formalising the deferral of the effective date by one year to 2018. The publication of the amendment, Effective Date of IFRS 15, follows from the IASB’s decision in July to defer the effective date from 1 January 2017 to 1 January 2018, having considered the feedback to its consultation.
Companies applying IFRS continue to have the option to apply the Standard early. The main reason for the amendment is that the IASB is currently consulting on some proposed clarifications to the Standard. These proposals follow discussions within the Revenue Transition Resource Group (TRG). The TRG was established by the IASB and the US Financial Accounting Standards Board (FASB) after the Standard was issued in May 2014 to support companies in its implementation.
Consultation on the proposed clarifications ends on 28 October 2015. The IASB expects to complete its discussions on the clarifications in the light of the feedback received by the end of 2015, after which any final amendments to the Standard will be issued.
Proposed clarifications to and transition reliefs for IFRS 15 Revenue from Contracts with Customers
The proposed targeted amendments follow discussions at meetings of the Transition Resource Group (TRG), which was set up jointly by the IASB and the FASB to support companies in implementing the new revenue Standard after it was issued in May 2014. The Exposure Draft proposes to clarify:
- how to identify the performance obligations in a contract;
- how to determine whether a party involved in a transaction is the principal (responsible for providing the goods or services) or the agent (responsible for arranging for the goods or services to be provided to the customer); and
- how to determine whether a licence provides the customer with a right to access or a right to use the entity’s intellectual property.
In addition, the IASB proposes two reliefs to aid the transition to the new revenue Standard. The consultation is open for comment until 28 October 2015. The IASB expects to complete its discussions on these issues by the end of 2015, after which the final amendments to the Standard will be issued.
PricewaterhouseCoopers
Public Sector Accounting Workshop Collaboration with PwC
Shasat and PwC are pleased to announce their joint agreement to offer International Public Sector Accounting Standards (IPSAS) training workshops. According to Patrice Schumesch, PwC global public finance & accounting partner and chair of PwC’s IPSAS technical working group. “While the global move toward IPSAS is accelerating, building capabilities remains a challenge. We want to address this challenge and share with public sector professionals our extensive practical experience in helping governments and international organisations implement and apply IPSAS. We are pleased to join forces with Shasat for this initiative with the objective to offer training of the highest quality. IPSAS Immersion Workshop
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