FASB limits scope of FAS 157 leasing exception

BVWireIssue #66-2
March 12, 2008

At one of its more recent meetings, the Financial Accounting Standards Board (FASB) discussed comments to the proposed FSP FAS 157-a, Application of FASB Statement No. 157 to FASB Statement 13 and Its Related Interpretative Accounting Pronouncements that Address Leasing Transactions.  A number of respondents questioned whether the scope of the proposed FSP included measurements under FASB Statements Nos. 144, 146, and in particular, 141R Business Combinations, with the related FASB Interpretation No. 21, Accounting for Leases in a Business Combination.

After deliberations, the staff recommended that the scope of the proposed FSP include only Statement 13 and its related pronouncements.  “The scope exception will not apply to assets acquired and liabilities assumed in a business combination,” the staff decided.  FAS 141R (and 141) will still require these to be measured at fair value, “regardless of whether such assets and liabilities are related to leases.”

The staff did not recommend issuing further guidance on these points, noting that this could delay the final FSP—but it will consider alternatives to 141R requirements after further research and discussion regarding 157’s impact on acquired leases.  The next step: The Board will draft a final FSP to submit to written ballot.  The minutes of the Feb. 6th meeting are available here.

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