BC3 The previous accounting model for leases required lessees and lessors to classify their leases as either finance leases or operating leases and to account for those two types of leases differently. It did not require lessees to recognise assets and liabilities arising from operating leases, but it did require lessees to recognise assets and liabilities arising from finance leases. The IASB, together with the US national standard-setter, the Financial Accounting Standards Board (FASB) (together ‘the Boards’), initiated a joint project to improve the financial reporting of leasing activities under IFRS and US Generally Accepted Accounting Principles (US GAAP) in the light of criticisms that the previous accounting model for leases failed to meet the needs of users of financial statements. In particular:
(a) information reported about operating leases lacked transparency and did not meet the needs of users of financial statements. Many users adjusted a lessee’s financial stateme
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