IPSASB – Accounting for leases – where are we going to in the public sector?

Accounting for leases – where are we going to in the public sector?

The IPSASB has been discussing for some time whether to adopt IFRS 16 on Leases for both lessor and lessee accounting. The IPSASB’s initial proposal was to apply the “right of use model” for both lessees and lessors. Based on feedback received, the IPSASB has revisited this proposal and will align any new IPSAS on leases with IFRS 16.

In order to progress the project, the IPSASB will work on developing an IPSAS aligned with IFRS 16 over the next few months. The proposed IPSAS will not deal with public sector specific lease issues. However, the IPSASB is aware that there are public sector issues that need to be resolved, including how to deal with concessionary leases, i.e. leases on below market terms, as well as peppercorn leases, i.e. leases where no or only nominal consideration is exchanged in the arrangement.

To resolve these issues, the IPSASB will issue a Request for Information when the proposed IPSAS is issued for comment. The purpose of the Request for Information is to identify what specific issues exist in jurisdictions that relate to lease transactions, or arrangements that are similar to leases. Some examples of potential issues – over and above those already mentioned – could include access rights, rental contracts for social housing, and arrangements where entities share premises but there is no agreement in place.

Leases will be discussed again in September 2020 by the IPSASB. Follow the debate: https://www.ipsasb.org/consultations-projects/leases.