Cancellable leases
If both the lessee and the lessor have the right to cancel the lease (without termination penalties) such that the minimum term, including any non-cancellable period and any notice period, is 12 months or less, it meets the definition of a short-term lease. The key here is that either side can cancel; if one side can require renewal, then normal lease accounting applies.
Investment properties
Rental income from property accounted for (under IFRS 40) as investment property will not be capitalized, as such property is out of scope of the new leasing standard. However, the boards still chose how to recognize rental income: straight line, or another systematic basis if more representative of use of the asset.
Disclosures for these lessor leases are to include:
- Maturity analysis of future rents (at least 5 years by year, then the rest combined). This is not to be combined with the maturity analysis for capitalized leases.
- Separate entries for minimum contractual rents and variable lease payments
- Cost, carrying amount, and accumulated depreciation on leases
- Narrative information about lease arrangement
The staff listed the following items to be redeliberated:
- the definition of investment property (which is scoped out of this standard)
- the "lessee accounting model"--as mentioned in a Wall Street Journal article that I commented on previously, the boards are going to discuss further a way to recognize level expense over the life of a lease, even though they rejected this earlier
- additional disclosure items
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