IFRS vs US GAAP Leases
1 best read of all comparisons
In 2016, the IASB and FASB issued new standards addressing the accounting for leases (IFRS 16 and ASC 842, respectively). The prior leasing standards (IAS 17 and ASC 840, respectively) were in practice significantly converged. The primary objective of the new standards was to require lessees to recognize assets and liabilities on the balance sheet for most lease contracts. Although the boards accomplished this goal, they did so in different ways.
Thus, while the boards remained largely converged with respect to scope and initial measurement, they significantly diverged on subsequent measurement for lessees: the IASB requires a single measurement model (akin to that for finance leases under U.S. GAAP) while the FASB maintains a two-class system (operating and finance lease classifications).
In addition, while certain presentation and disclosure requirements in IFRS 16 are similar to those in ASC 842, there are also certain differences (quantitative and qualitative) in this area. Other differences between IFRS 16 and ASC 842 may also arise as a result of differences between IFRS Standards and U.S. GAAP in other standards, including those related to (1) impairment of financial instruments and long-lived assets other than goodwill and (2) the accounting for investment properties.
The Lease Standards, effective 2019, requires that leases greater than 12 months are reported on Balance Sheets as Right of Use Assets under both US GAAP and IFRS. US GAAP distinguishes between Operating and Finance Leases (both are recognized on the Balance Sheet), while IFRS does not (any more).
The following discussion captures a number of the more significant GAAP differences under both the standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.