Si, si,.. todo el mundo sabe que es el tipo de interes... ya... igual que todo el mundo sabe jugar al ajedrez... o no?
There was a time, not so long ago, that Microsoft was evil and Google were the good boys in the neighbourhood .., well that might have changed now but still there is a tool that IS DANGEROUS.. and you all use it ! and most of you use as much as your won brain (just 15% of the total) :) EXCEL (tm)!
I learnt the basics of the spreadsheet program in the nineties, just finishing the university. At that moment I found it the perfect tool! I could be used for almost everything.. and each new version came loaded with more and more features...I loved it! ... but then, i started to understand how it worked... and realized that it is just a tool, a good one,.. but just as good as the user that handles it...
Later on, in all my trainings to my fellow colleagues I always said pretty much the same: beware of the tool! it can hide mistakes and nobody will ever look for it! beware of the formulas, beware of the typing directly in a formula, beware of the references,....
Now, that even monetary policies (http://bit.ly/13kcmU2) are driven by EXCEL ... this warnings are more useful than ever..
Written by Andy Thompson legal & regulatory editor
Friday, 17 May 2013 10:52
The long awaited second exposure draft (ED2) of the new global lease accounting standard was finally published on May 16. It contains few real surprises, due to the very public deliberation process used by the standard
setters through the long gestation period. It nevertheless throws up some key issues that will need to be addressed by the leasing industry during the comment period running for the next four months.
The two standard setting bodies – the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) - have issued almost identical versions of the proposal, consistent with the aim of a converged standard.
Most of the divergences between the two versions concern aspects of relatively minor importance, within the disclosure rules for notes to the accounts. Those mainly reflect areas of close interface with the accounting
rules for property, plant and equipment (PPE) owned by the users, where the respective accounting standards (IAS 16 within international financial reporting standards (IFRS) and Topic 630 in US GAAP) are in many respects
There are, however, some significant “alternative views” released with ED2, covering some of the major issues, where minorities on each of the Boards have expressed dissent.
P&L expensing rules
The core objective of the new standard is to require on-balance-sheet recognition by lessees of all leases capable of running for more than 12 months. However, one of the most notable parts of the release is the section of the
“Basis for Conclusions” document accompanying the main draft, addressing the most controversial lesse accounting issue that arose within the re-deliberation period after the first exposure draft (ED1) issued in 2010. This is the method for expensing leases in the profit and loss (P&L) account or income statement, where the Boards last June adopted a split model as between equipment and real estate leases.
What is proposed is described as a new lease classification system. Under current rules the split into finance and operating leases determines whether or not the asset goes on the balance sheet, and it is based on whether “substantially all of the risks and rewards of ownership” are passed to the lessee. Under the new proposals all leases – except those that cannot run for more than 12 months – will go on-balance-sheet. The new lease classification split, into what the Boards are calling Type A and Type B leases, will determine the lessee's periodic expense profile – and the dividing line will be struck in a different place.
The proposal is that most real estate leases will be Type B. These will be expensed on a straight line basis, and presented as a single rental expense, like operating leases under existing rules (although the difference of course will be that the asset will now be on-balance-sheet). Nearly all equipment leases by contrast will be Type A - expensed on a front loaded basis, like current finance or capital leases (in fact a combination of heavily front loaded finance charges, and deprecation or amortization normally on a straight line basis).
There will be some exceptions on either side. Some of the longest property leases, like for example the 99-year leases sometimes used in UK real estate, will be Type A; and a very narrow range of equipment leases - where the residual value (RV) is exceptionally high and yet the lease period can run for more than 12 months so capitalization will be required - might be Type B.
The Boards are claiming that the underlying principle of the split will be consistent for both equipment and property leases. The stated principle is that a lease should be Type A, accounted for like a financing transaction, “if the lessee consumes more than an insignificant proportion of the benefits embedded in the underlying asset”. That is an intentional moving of the goal posts compared with existing lease classification. At present, there is in effect financing type treatment only if the lessee consumes substantially all the benefits of the asset; whereas the new proposal is for financing type treatment in any case where the portion consumed is significant.
Yet the starting point for the test will be whether the lease is for equipment or real estate. If it is equipment, it will be Type A, front loaded expense, unless either the lease term is insignificant in relation to the economic life of the asset, or the present value (PV) of the lease payments is insignificant in relation to the fair vale of the asset.
For real estate, it will be Type B unless either the lease term is a significant part of the asset's economic life, or the PV of lease payments represents substantially all of the fair value of the asset.
At first sight this appears not to be consistent, in that the Boards have not moved the goal posts for real estate leases (where that PV test at “substantially all” of fair value is in fact taken from the current IAS 17 international standard) as they have for equipment leases. However, the Boards argue that this is not truly inconsistent, because in the case of a commercial property lease the economic life part of the test will relate to the life of the
building, which of course represents a part of the value of the whole property including the land value.
They say that a property lessee is not truly consuming more than an insignificant portion of the benefits embedded in the property (including the land) unless the lease term is a major part of the remaining economic life of the building; whereas of course equipment lessees are using up rapidly depreciating assets.
The equipment vs real estate split in the P&L expensing model remains highly controversial. It has already attracted criticism before ED2 was released, and seems certain to attract widespread comment in the formal
The second exposure draft of lease accounting standard should be issued this week...how will the industry respond?
This and many other questions on the latest CHP Consulting's Legal and Regulatory Update.
You can read it the article at http://www.assetfinanceinternational.com/lease-accounting/news/8633-lease-accounting-the-final-changes-before-re-exposure
Written by Andy Thompson
This month the accounting standard setting bodies completed what should be the final stage of public re-deliberation of the draft new global lease accounting standard before the re-exposure draft (RED) is to be issued, probably in April this year.
These bodies are conscious that their main proposals will be contentious, and have been taking some advice through an external review process to ensure so far as possible that the issues are not complicated by any avoidable technical weaknesses.
The main round of public re-deliberation, bringing major changes to the first exposure draft (ED1) issued in 2010, was completed by the standard settershe International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) - in the middle of last year. Since then, however, the Boards have held further public "sweep-up" sessions on technical issues identified either by their staffs in the re-drafting process or by their external review advisers.
Transition for finance leases
From the standpoint of equipment leasing the main decision of the Boards this month concerns the transition rules, for both lessees and lessors, for those leases currently classified as finance or capital leases and which are running at the date when the reporting entity first has to make the transition to the new standard.
Since the Boards' first detailed proposals for transition in ED1, they have proposed a relatively simple "grandfathering" type solution for transitioning finance leases, which are of course already on-balance-sheet for the lessee. This involves carrying forward the same depreciated balance sheet amounts for the lessee's assets and liabilities under the lease, or for the lessor's receivables, as derived under the current accounting rules.
Under the controversial proposals adopted by the Boards in June 2012 for an "equipment v real estate" split (subject to some exceptions) in lessees' annual profit and loss (P&L) account expenses and lessors' income recognition profiles, all current finance leases (as well as many operating leases) will be within what the Board are now calling the Type 1 category. The accounting rules for these will broadly match current finance lease accounting, which of course strengthens the case for a simplified transition solution.
However, during the pre-RED review process it became apparent to the Boards that they had not fully clarified, and indeed perhaps not fully considered, how the grandfathering of finance leases should work after Day 1 of the transition.
For there will be some differences between current finance lease and new Type 1 lease accounting, mainly in the area of residual values (RVs) and more particularly RV guarantees (RVGs). For lessees, RVGs must currently be included in the measurement of minimum lease payments up to the maximum RVG amounts payable, whereas in the new rules they will be included only up to the expected amounts.
On the lessor accounting side, under the new Receivable and Residual (R&R) accounting model RVGs will be accounted for separately from the lease receivables, whereas at present they are included within them. The same is true of unguaranteed RVs, although by definition any of these will be relatively small in finance leases.
On the other hand the Boards feel that the more far reaching changes in lease measurement between the current and new rules, in such areas as contingent and variable rentals, will not arise to a significant extent on finance leases but only on operating leases.
The Boards wanted to avoid keeping the current leasing standards in operation alongside the new ones, just so that reporting entities could be referred to the rules for grandfathered transactions.
They have now confirmed that for both lessees and lessors, the carrying amounts for finance leases on transition will be the same as those immediately before under existing rules. For presentation and disclosure purposes, RVGs and RVs will remain quantified and characterized as under existing rules (i.e. reflecting existing measurement rules for lessees, and embedded within receivables for lessors) unless the lease is modified, for example through an upgrade, in which case it will be re-measured under the new rules.
This solution represented a compromise between two alternatives which had been identified in the staff report. The precise wording of the relevant part of the draft RED will therefore require some further re-drafting. As previously agreed by the Boards, lessees and lessors will have the option of a fully retrospective application of the new rules to running finance leases, though it seems perhaps unlikely that many will opt for it.
Other transition issues
The more challenging transition issue, particularly on the lessee side, is that for operating leases. In October 2011 the Boards agreed a significant simplification of what had been proposed there in ED1. That decision was not revisited this week, although it was made before the decision for the "equipment v real estate" (or Type 1/ Type 2) split for P&L accounting purposes, and current operating leases will be split between the two types.
The principles of the earlier decision on operating lease transition are considered equally applicable to Type 1 and Type 2 leases under the proposed new rules. Indeed the draft of this part of the RED was included in this week’s staff report on finance lease transition, in case the Boards might have wished to make a radical change in the earlier decision on finance lease transition by applying the same transition rules for both existing types of lease. As noted above, however, this was not their decision.
In conjunction with the joint Boards’ review of finance lease transition, FASB alone also this month reviewed the transition rules for US lessors under "leveraged leases". These represent a special class of capital or finance lease on which tax benefits are generally available to the lessor and the lease is largely funded by a third party investor who has recourse to the lease receivables rather than to the lessor as a debtor.
Current rules in US GAAP allow for linked accounting for the leveraged lease and the funding debt. They also allow for the deferred tax position to be taken into account in measuring the lessor’s net investment in the lease from one period to the next, for the purpose of deriving a constant periodic rate of return on the lease. There is no comparable rule within international reporting standards (IFRS); and lessee accounting in US GAAP is of course the same for these leases as for other capital leases.
FASB had already agreed that leveraged lease accounting will not be retained in the new converged standard, and there will be no grandfathering for such leases running at the time of transition. This week FASB decided that leveraged leases will be subject to fully retrospective transition. They decided not to adopt a staff recommendation to apply the same transition rules for these as for other capital leases.
The other decision this month affects only accounting for real estate sub-leases by entities subject to IFRS. It arose as an indirect consequence of the Boards' decision last June on the lessee's P&L profile.
This concerns the case where a sub-leased property falls within the definition of "investment property", viewed from the sub-lessor's standpoint. This will usually be the case where the sub-leased premises are held primarily for generating rental income, rather than to reserve them for future occupational use in the sub-lessor's own business subsequent to the sub-lease period.
Under the IAS 40 standard, lessors of investment property can account for it on a "fair value" basis, with gains or losses from regular revaluations taken to P&L, as an alternative to accounting for it at cost. However, the IAS 17 general lease accounting rules apply to all lessees of investment property (including sub-lessors in respect of their head leases), and also to property lessors where the lease is either outside the investment property definition or opted out of fair value accounting (FVA) and accounted for at cost..
FVA is always an elective option under IAS 40. However, where an investment property lease is a sub-lease, under current rules the finance/ operating lease classification of the head lease makes a material difference to the degree of flexibility in the FVA election.
Where the head lease is an operating lease, an investment property sub-lease can be opted into FVA individually. By contrast, the election can only be exercised en bloc for all of any investment properties that an entity either owns outright or holds on finance leases.
Following the Boards’ decision last June, there will in effect be a new form of polarized lease classification in the new converged general leasing standard. Among cases where a sub-lease is classed as an investment property lease, it seems likely that there will be head leases on either side of the new line. For example, to take real estate lease periods that are customary in the UK, 99-year leases are likely to be classed as Type 1 (in line with nearly all equipment leases); while 25-year commercial property leases would generally be in Type 2, with straight line P&L expensing for lessees.
The IASB therefore considered this month whether the difference of treatment within IAS 40 by reference to head leases should be carried forward to the new lease classification. That would have meant allowing investment property sub-lessors to exercise the FVA option on a lease-by-lease basis where the head lease is classified as Type 2, as they can now where the head lease is an operating lease.
However, the Board decided against this. They agreed that for the purpose of the FVA election on sub-leases, once the new general leasing standard is in place all head leases should have the same effect as those now classed as finance leases. The election will thus have to be exercised en bloc for all of an entity's investment property leases, whether the real estate is owned outright by the lessor or held on any kind of head lease.
This issue does not currently arise in US GAAP, which has no FVA rules for investment property. FASB is working on the adoption of an investment property standard, but as presently conceived it will not be fully converged with IAS 40 since it will apply FVA on a non-elective basis and possibly to a narrower range of entities.
Depending on its final form, FASB's future investment property standard may or may not need to incorporate specific rules related to sub-lessors' head leases. In IFRS, however, the new agreed rule for this will be within the general leasing standard. As with the first ED, the RED and final form of the standard will have separate IASB and FASB versions to cover limited points of divergence, mostly resulting from areas of interface with related non-converged standards like IAS 40.
The timetable now
It appears that the RED will not specify the proposed effective date of the new standard, nor even a possible "not before" date as was done in ED1. Instead the effective date will be decided when the final new standard is close to release.
The proposed Type 1/ Type 2 split for P&L accounting purposes seems certain to generate critical comment, and prior to the RED it will not have been field tested in any outreach process with account preparers and users. That could yet be a cause of even further delay.
However, if the Boards feel able to finalize the standard in accordance with the RED it may be possible to issue it towards the end of this year. In that case it now seems likely that the effective date would be for accounting periods beginning on or after January 1, 2017. For listed companies, the dates of initial application, from which comparative accounts will have to be prepared on the new basis alongside main accounts under the existing rules, could then be January 2015 for those subject to US GAAP and January 2016 under IFRS.
Significantly, the Boards this month decided on an effective date of January 2017 for a separate new converged accounting standard on the general subject of revenue recognition (Rev Rec). The Rev Rec standard has many areas of interface with the lessor side (though not the lessee side) of the leasing standard, and the two projects were originally intended to be contemporary.
Although both had to be re-exposed, the further long delays in the leasing standard between its two ED versions has led to its falling behind the Rev Rec one, which is now about to be issued in its final form following an RED issued 15 months ago. However, the Boards will probably be aiming for a common effective date for both
Licenciado en Empresariales soy por lo tanto un empresologo...y he trabajado como morosologo, analista,...