The current debate and developments in accounting for leases for Essay

The current debate and developments in accounting for takes for lessees - Essay ExampleThis radical provides the discussion regarding the reasons behind aforesaid changes in standards. Maintaining focus from the lessee point of view, this report puts together the new proposal for lessees regarding the justifiedly to use model. Moreover, it will discuss the wedge of proposed changes on the companies worldwide using international standards in the preparation of their financial statements. INTRODUCTION Lease is essentially a form of rental system where the possessor (lessor) receives rentals from lessee. Corresponding to mentioned rentals, lessee gains practiced to use the additions (EZ Technical, 2009). Lease is a major character reference of finance for business and to give the correct picture of business, it must provide the source of this important information in the financial statement (Roberts, Weetman, Gordon, 2008). Currently, lease under operating category does not prov ide this information (Melville, 2011). Therefore, to ensure the financial statements hold lease transactions in harmony with commercial essence and not in according to the legal form only, International Accounting Standards Board (IASB) and the US monetary Accounting Standards Board (FASB) proposed new approach to lease accounting (Cotter, 2012). ... Hence, factors determining lease as finance lease are further mentioned infra (Kelly and Kelly, 2009) The ownership of the asset is finally transferred to the lessee at the end of agreement term. Risks such as cost of maintenance, obsolescence due to technological advancement etc are all transferred to lessee. Rewards pertaining to right on profit from the usage of asset as well as gaining benefit for its whole useful vivification are transferred to lessee. The lessee can purchase the asset at a price notably below than its fair value. Or it has right to extend the lease for secondary term at rent well below market value. The major portion of useful life or the economic life of assets is accounted in lease term. Usually 75% of asset life is accounted in term. At the time of lease agreement, present value of the minimum lease payments represent the substantial fair value of the leased asset. In lineament of cancellation of agreement the charges are to be borne by lessee. In the light of these factors, agreement can be defined as finance. In case of the lease agreement does not account for the discussed conditions it shall be then regarded as operating lease. PROPOSED STANDARD- EXPOSURE DRAFT ED/2010/9 LEASES International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) on 17 August 2010 published proposal Exposure Draft ED/2010/9 Leases (Hales, Venkataraman, and Wilks, 2012). This draft suggested new approach to lease accounting for lessees and lessor. The new draft suggested replacement of IAS 17 and change in accounting treatment of lease considerably (Eames, 2011). Specific to lessee, ED/2010/9 Leases proposes right of use model where the lessee would