New Lease Accounting Considerations – Type A and Type B Leases

In their continuing deliberations, the accounting boards are now considering three different approaches to lease accounting. The first approach would basically retain the Type A–Type B model as proposed in the Exposure Draft – Type A for leases of personal property and Type B for leases of real property (land and buildings).

The second approach being considered is a single model, in which lessees would account for all leases as they would for Type A leases. Under this scenario Type B leases would be eliminated.

The third approach being considered would still utilize Type A and Type B leases, however the dividing line would no longer be the type of asset as proposed in the exposure draft. Rather, we would return to the current GAAP distinction between capital and operating leases, albeit now including all leases on the balance sheet. Lessees would account for most capital leases as Type A leases and for most operating leases as Type B leases.


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