I. Introduction Since the Enron sandal in 2001, Security Exchange Commission (SEC has made closing loopholes it’s hope priority. The SEC realized that there was a loophole relating to leasing. In 2006, FASB began to work on a new lease accounting standard intended to close the loophole of off-balance operating leases. The FASB and IASB issued a Discussion Paper proposing that lessees capitalize all leases on the balance sheet was done in 2009. In 2010, the FASB and IASB issued an Exposure Draft and distribute it for public comments. The model set forth in the ED proposed that lessees move all leases onto the balance sheet as a right-of-use asset and liability. By 2013, the FASB and IASB issued a Revised Exposure Draft and opened a four-month comment period. After, the boards solidified parts of the standard, including that all leases would be brought onto the balance sheet, expense recognition models, and liability measurement. In 2016, the FASB published ASC-842, the new lease accounting standard for companies reporting under US GAAP. The IASB issued IFRS 16 the new lease accounting standard for companies reporting under the International Financial Reporting Standards. In 2018, the FASB issued an update to ASC 842 to both clarify and simplify the application of the new lease standard to land easements. The FASB also issued a proposal to ease companies’ transition to the new standard by offering a practical expedient that would allow companies to apply the transition provisions at the adoption date, instead of at the earliest comparative period. The proposal was approved in July of 2018.Objective of Research Project. The objective of the Research Project is to describe some of the key differences of presenting and reporting Leasing in the Financial Statements under U.S. GAAP and IFRS. Organization of text. This paper starts by presenting the guidance applicable to Inventory under US GAAP and IFRS, this section contains the specific reference in each case as well as an illustrative case, who serves as an example of the application of the referred guidance. This section is followed by a little of history. A summary of History of Convergence by each standard as well a history of convergence between them. After having a theoretical picture of the Accounting Standards that rule Inventory, I compare both, beginning with its similarities and then explaining each of the differences encountered. Finally, I talked about the expectation of greater convergence between IFRS and US GAAP, exposing its possible impact and the elements that impede the complete convergence between them. At the end, the conclusions of this paper.U.S. GAAP Accounting Standards for Presentation of Financial Statements.Standard The primary US GAAP and SEC guidance applicable to leasing accounting is the ASC 842 Leasing.Illustrative Case. A lessee shall either present in the statement of financial position or disclose in the notes all of the following: a. Finance lease right-of-u ...

1. I. Introduction
Since the Enron sandal in 2001, Security Exchange Commission
(SEC has made closing loopholes it’s hope priority. The SEC
realized that there was a loophole relating to leasing. In 2006,
FASB began to work on a new lease accounting standard
intended to close the loophole of off-balance operating leases.
The FASB and IASB issued a Discussion Paper proposing that
lessees capitalize all leases on the balance sheet was done in
2009. In 2010, the FASB and IASB issued an Exposure Draft
and distribute it for public comments. The model set forth in the
ED proposed that lessees move all leases onto the balance sheet
as a right-of-use asset and liability.
By 2013, the FASB and IASB issued a Revised Exposure Draft
and opened a four-month comment period. After, the boards
solidified parts of the standard, including that all leases would
be brought onto the balance sheet, expense recognition models,
and liability measurement. In 2016, the FASB published ASC-
842, the new lease accounting standard for companies reporting
under US GAAP. The IASB issued IFRS 16 the new lease
accounting standard for companies reporting under the
International Financial Reporting Standards.
In 2018, the FASB issued an update to ASC 842 to both clarify
and simplify the application of the new lease standard to land
easements. The FASB also issued a proposal to ease companies’
transition to the new standard by offering a practical expedient
that would allow companies to apply the transition provisions at
the adoption date, instead of at the earliest comparative period.
The proposal was approved in July of 2018.Objective of
Research Project.
The objective of the Research Project is to describe some of the
key differences of presenting and reporting Leasing in the
Financial Statements under U.S. GAAP and IFRS. Organization
of text.
This paper starts by presenting the guidance applicable to
Inventory under US GAAP and IFRS, this section contains the

2. specific reference in each case as well as an illustrative case,
who serves as an example of the application of the referred
guidance. This section is followed by a little of history. A
summary of History of Convergence by each standard as well a
history of convergence between them. After having a theoretical
picture of the Accounting Standards that rule Inventory, I
compare both, beginning with its similarities and then
explaining each of the differences encountered. Finally, I talked
about the expectation of greater convergence between IFRS and
US GAAP, exposing its possible impact and the elements that
impede the complete convergence between them. At the end, the
conclusions of this paper.U.S. GAAP Accounting Standards for
Presentation of Financial Statements.Standard
The primary US GAAP and SEC guidance applicable to leasing
accounting is the ASC 842 Leasing.Illustrative Case.
A lessee shall either present in the statement of financial
position or disclose in the notes all of the following:
a. Finance lease right-of-use assets and operating lease right-of-
use assets separately from each other and from other assets
b. Finance lease liabilities and operating lease liabilities
separately from each other and from other liabilities.
Right-of-use assets and lease liabilities shall be subject to the
same considerations as other nonfinancial assets and financial
liabilities in classifying them as current and noncurrent in
classified statements of financial position. In the statement of
comprehensive income, a lessee shall present both of the
following:
a. For finance leases, the interest expense on the lease liability
and amortization of the right-of-use asset are not required to be
presented as separate line items and shall be presented in a
manner consistent with how the entity presents other interest
expense and depreciation or amortization of similar assets,
respectively.
b. For operating leases, lease expense shall be included in the
lessee’s income from continuing operations.IFRS Accounting
Standards for Presentation of Financial Statements.Standard

3. The primary IFRS guidance applicable to leasing accounting is
IFRS 16.Illustrative Case.History of Convergence for
Presentation of Financial Statements.US GAAP Convergence
GAAP is an acronym for Generally Accepted Accounting
Principles which is followed by countries like the United States
of America. In addition, GAAP is a set of rules and standards
for financial reporting. The Great Depression in 1929 caused
years of hardship for millions of American, it was primarily
attributed to faulty and manipulative reporting practices among
business. Historically, people did not have any guidelines for
reporting which results in negative outcomes, hence the
necessity of creating a uniform set of principles made the GAAP
born and evolve to present times.
The United States has claimed to be working towards
developing a single set of high quality, useful financial
statements for all of its investors. Throughout its history, its
standard setters (first the Accounting Principles Board and the
Committee on Accounting Procedure, then the FASB) have
attempted to protect the investor and other users of the financial
statement, rather than the corporate preparers. As such, it has
developed and expanded its own set of standards in line with its
people's needs instead of converging with international
standards that attempt to meet the needs of all parties globally.
The United States has made strides towards the comparability of
its firms' financial statements and has historically been one of
the leaders in not only setting accounting standards, but also
working towards harmonization of global accounting
standards.IFRS Convergence
In 2005, the US Securities and Exchange Commission (SEC)
expressed concerns about the lack of transparency of
information about lease obligations, reiterating concerns already
expressed by investors and others. Responding to those
concerns, the IASB and the US national standard-setter, the
Financial Accounting Standards Board (FASB), initiated a
project to improve the accounting for leases. The IASB and the
FASB agreed that a customer (lessee) leasing assets obtains an

4. asset and typically also a liability at the start of a lease.
However, applying previous lease accounting requirements,
most leasing transactions were not reported on a company’s
balance sheet; so these assets and liabilities were not
recognized. Listed companies using IFRS or US GAAP
disclosed almost US$3 trillion of off-balance sheet lease
commitments in 2014.
The International Accounting Standards Board (IASB) issued
IFRS 16 Leases in January 2016. IFRS 16 sets out the principles
for the recognition, measurement, presentation and disclosure of
leases for both parties to a contract, the customer (‘lessee’) and
the supplier (‘lessor’). IFRS 16 is effective from 1 January
2019. A company can choose to apply IFRS 16 before that date
but only if it also applies IFRS 15 Revenue from Contracts with
Customers. IFRS 16 completes the IASB’s project to improve
the financial reporting of leases. IFRS 16 replaces the previous
leases Standard, IAS 17 Leases, and related
Interpretations.Convergence between US GAAP and IFRS.
In 2001, the IASB was formed to replace the IASC as the
international standard-setter. In 2002, the FASB and IASB
signed the Norwalk Agreement and started working together to
converge United States Generally Accepted Accounting
Standards (U.S. GAAP) and International Financial Reporting
Standards (IFRS). In 2005, another major milestone towards
having one set of accounting standards applied globally was
achieved when the European Union (EU) adopted IFRS for EU
listed companies (FASB, Comparability in International
Accounting Standards: A Brief History). In 2007, the two
Boards released their first major mostly converged standards on
business combinations (FASB Website Timeline). The two
boards also reached full or partial convergence on: borrowing
costs (interest capitalization), discontinued operations, fair
value measurement, segment reporting, and revenue recognition
(Pacter, 2013). In 2007, U.S. SEC agreed to forego the required
U.S. GAAP reconciliation of reported net income and
shareowners’ equity to US GAAP for foreign private issuers

5. that applied “IFRS as issued by the IASB” in their financial
statements. There are still many issues with convergence. Many
small US companies oppose convergence because they do not
have the time or money to learn and implement new financial
reporting standards. Many accountants in the U.S. also believe
that U.S. GAAP is a higher quality alternative to IFRS because,
in many cases, U.S. GAAP requires more precise measurement
and reporting of financial statements. Current Similarities and
Differences for Presentation of Financial
Statements.Similarities:
The similarity between the two sets of standards for lessees is
also the biggest improvement in the lease accounting model.
Both standards require the recognition of a right-of-use asset
and a lease liability on the balance sheet for all
leases.Differences
There are significant differences between U.S. GAAP and IFRS
with respect to accounting for Leasing, which include:
Low-value asset exemption
In US GAAP, here is no recognition exemption for leases based
on the value of the underlying asset. In IFRS, Lessees may
elect, on a lease-by-lease basis, not to recognize leases when
the value of the underlying asset is low (e.g., US$5,000 or less
when new).
Scope exemption for intangible assets
In US GAAP all leases of intangible assets are excluded from
the scope of ASC 842. In IFRS, lessees may apply IFRS 16 to
leases of intangible assets other than rights held by a lessee
under licensing agreements within the scope of IAS 38,
Intangible Assets, for items such as motion picture films, video
recordings, plays, manuscripts, patents and copyrights. Lessors
are required to apply IFRS 16 to leases of intangible assets,
except for licenses of intellectual property that are in the scope
of IFRS 15.Lease liability reassessment of variable lease
payments

6. In US GAAP, Changes in variable lease payments based on an
index or rate result in a remeasurement of the lease liability
when the lease liability is remeasured for another reason (e.g., a
change in the lease term). In IFRS, Changes in variable lease
payments based on an index or rate result in a remeasurement of
the lease liability whenever there is a change in the cash flows
(i.e., when the adjustment to the lease payments takes
effect).Determination of the discount rate
In US GAAP, lessees and lessors determine the discount rate at
the lease commencement date. In IFRS, Lessees determine the
discount rate at lease commencement, but lessors determine the
rate implicit in the lease at the lease inception date.Lessee &
Lessor lease classification
In US GAAP, recognized leases are classified as either finance
or operating. Lessees classify leases at the lease commencement
date. Leases are classified as operating, direct financing or
sales-type leases at the lease commencement date. In IFRS, all
recognized leases are accounted for similarly to finance leases
under ASC 842. Leases are classified as operating or finance
leases at the inception date of the lease.Lessee Accounting:
Short-term leases — existence of a purchase option & change in
lease term
In US GAAP, A lease may not qualify as a short-term lease if it
includes a purchase option that is reasonably certain to be
exercised. A lease no longer qualifies as a short-term lease
when there is a change in a lessee’s assessment of either of the
following: The lease term so that, after the change, the
remaining lease term extends more than 12 months from the end
of the previously determined lease term and whether the lessee
is reasonably certain to exercise an option to purchase the
underlying asset. In IFRS, A lease may not qualify as a short-
term lease if it includes a purchase option, regardless of
whether the lessee is reasonably certain to exercise the option.
A change in the terms of a short-term lease creates a new lease.
If that new lease has a lease term greater than 12 months, it
cannot qualify as a short-term lease.Lessor Accounting:

7. Recognition of selling profit for direct financing leases
In US GAAP, selling profit on direct financing leases is
deferred at lease commencement and amortized into income
over the lease term. In IFRS, IFRS does not distinguish between
sales-type and direct financing leases. Selling profit on finance
leases is recognized at lease commencement.Lessor Accounting:
Recognition of selling profit for direct financing leases
In US GAAP, selling profit on direct financing leases is
deferred at lease commencement and amortized into income
over the lease term. In IFRS, IFRS does not distinguish between
sales-type and direct financing leases. Selling profit on finance
leases is recognized at lease commencement.Lessor Accounting:
Collectability
In US GAAP, Collectability of the lease payments is assessed
for purposes of initial recognition and measurement of sales-
type leases. It is also evaluated to determine the income
recognition pattern of operating leases. In IFRS, IFRS 16 does
not include explicit guidance for considering collectability of
lease payments.Gain or loss recognition in sale and leaseback
transactions
In US GAAP, the seller-lessee recognizes any gain or loss,
adjusted for off-market terms, immediately. In IFRS, the seller-
lessee recognizes only the amount of any gain or loss, adjusted
for off-market terms, that relates to the rights transferred to the
buyer-lessor.Leveraged leases
In US GAAP, leveraged lease accounting is eliminated for
leases that commence on or after the effective date of ASC 842.
However, leveraged leases that commenced prior to the
effective date are grandfathered. If an existing leveraged lease
is modified on or after the effective date, the lease would no
longer be accounted for as a leveraged lease but would instead
be accounted for under ASC 842. In IFRS, the seller-lessee
recognizes only the amount of any gain or loss, adjusted for off-
market terms, that relates to the rights transferred to the buyer-
lessor.Expectation of Greater Convergence for Presentation of
Financial Statements.Summary and Conclusions

8. It is apparent from the comparison of GAAP and IFRS, that
GAAP aims to provide definitive answers to potential questions
while IFRS intends to create a principle based framework.
Despite GAAP’s attempt to provide specific guidance on issues,
GAAP will never be fool proof. The success of GAAP is
directly dependent on its application and its ability to adjust to
an evolving global economy. We believe that as globalization
progresses we will see more and more instances of GAAP
failing to evolve, failing to adjust to new accounting scenarios
and failing to timely address accounting problems.References/
Bibliography
2016 Financial Markets Information
Treasury:
3-month Treasury bill rate
0.05%
1-year Treasury bond rate
0.11%
10-year Treasury bond rate
2.60%
Corporate bond yield:
Aaa
4.27%
Aa
4.43%
A
4.60%
Baa
4.69%

9. Market risk premium
6.1%
Lerner’s bonds rating credit risk is good to very good.
Lerner Actual Financial Statements, 2013-2015 ( $ millions)
201320142015
Income statement (Actuals)
Sales316.6330.1345.8
Cost of Goods Sold284.6296310.3
Gross profit3234.135.5
Operating expenses26.82930.5
Depreciation 1.51.81.9
Operating profit3.73.33.1
Interest expense0.20.20
Income taxes1.11.11.2
Net income2.421.9
Balance sheet (Actuals)
Cash3.21.60.5
Accounts receivable29.230.530
Inventories 4.84.95.9
Total Current assets37.43736.4
Net Property & Plant7.19.111
Investments 47.247.747
Total assets91.793.894.4
Accounts payable7.5910.3
Short term loan3.92.50.2
Total Current Liabilities11.411.510.5
Accrued expenses 1515.215.4
Other liabilities1717.217.8
Total liabilities43.443.943.7
Equity48.349.950.7
Total liabilities and equity91.793.894.4

10. Lerner 5YR. Forecasted Income Statements, 2016-2020 ( $
millions)
2016
2017
2018
2019
2020
Income statement
Sales
363.0
381.0
400.1
421.0
442.0
Cost of Goods Sold (90% of Sales)
Gross profit
Operating expenses (8% of Sales)
Depreciation
2.0
2.3
2.8
3.1
3.2
Operating profit
Interest expense
0.2
0.2
0.3
0.4
0.5
Income taxes
1.4
1.6
1.8
1.7
1.8

11. Net income
2016 2017
2018 2019 2020
Change in Net Working Capital 1.4 1.4
1.5 1.6 1.7
Capital expenditure 3.6 3.7
4.1 4.3 4.5
Bentley Industrial Services Management wants to acquire
Lerner Industrial Services Management Corporation. Lerner is
willing to be acquired at a minimum price of $125 million and
nothing less. However, two of Bentley’s major shareholders are
not in favor of this acquisition. Lerner had no scientific basis
for asking for a minimum of $125 million.
Industry Structure
The industry is about $120 billion in Industrial facility services
management including engineering energy needs that include
heating, ventilation, and air conditioning. The industry is very
competitive with a few large companies offering integrated
services, and many small ones offering specific single and
limited services. There is a great opportunity for large
companies to offer integrated solutions for “one stop shopping.”
Large firms may have an advantage in that they can get
premium pricing from integrated services and can get economies
of scale. Companies in this industry may be able to distinguish
themselves through branding and diversifying their offerings in
targeted industries.
The industry had experienced steady growth over the last

12. decade and the industry demand is expected to grow at 5% per
year in 2015 and 2016, whereas small companies with limited
offerings, or single service offerings is expected to grow at 3%
per year.
Lerner Industrial Services
Lerner is a large industrial services company with specialization
in integrated services solutions for a wide range of companies.
It grew from a small single service company to a large
integrated company within 30 years. Its specialization includes
strong technical expertise in engineering and management
services with solutions targeted to the Fortune 500 bio tech
companies, large hospitals, and pharmaceutical companies. The
company is highly respected and known for its high quality of
services which is an advantage that can make Lerner charge
premium prices. Despite this pricing strategy, the company had
experienced declining operating profit margins, increase
operating expenses, from 4% in 2012 to about 1% in 2015, and
declining cash balance on its balance sheet.
Bentley Industrial Services
Bentley Industrial facility services Management Company is not
as large as Lerner, and its service offerings are limited. The
company service offerings including heating, ventilation and air
conditioning services, as well as maintenance of buildings. The
company wanted to expand its services, and to become a fully
integrated company which can offer services such as building
engineering and energy solutions. Unfortunately, the company
lacks the expertise in this area. Bentley thinks that if it owns
Lerner, it will have the advantage it lacks, and Bentley then will
be able to increase its customer base, and diversify its services
to many other industry sectors. Bentley is well known company
for its operational efficiency as well. Bentley believes it can
improve Lerner’s financials by replacing its management, and
cutting expenses.
Bentley was convinced that the acquisition of Lerner will be
good for its shareholders and the company as Bentley can cut
costs when it combines the two companies and implement a

13. premium pricing strategy. Bentley expects Lerner revenues to
grow 6% per year from 2016 to 2020, and thereafter, 3% per
year into the future. Bentley did some forecasting and created
the financial projections for Lerner (see Lerner’s financials)
The news of the acquisition was publicly known, and the stock
market had mixed results. The financial investment firms were
concerned about whether Bentley could manage Lerner
efficiently and can achieve the reduction of expenses and other
financial success. Some of the shareholders and Board members
also were concerned. Nevertheless, Bentley convinced an
investment company to provide the financing for the purchase
of Lerner and decided to put together the financial information
herein.
Lerner will have an acquisition debt ratio of 45% with a tax rate
of 35%. The beta of Lerner is 1.3.
Answer the following questions:
NOTE: THIS IS AN EXAM AND YOU ARE EXPECTED TO
DO ORIGINAL WORK. USING THE WEBSITES FOR ANY
ANSWERS YOU PROVIDED WILL NOT BE COUNTED
TOWARDS THE GRADING. POINTS WILL BE DEDUCTED
FOR USING REFERENCES FROM WEBSITES.
1. Do you think that Bentley should acquire Lerner? Why?
2. Should Bentley pay $125 million for Lerner? Can the
company justify this price?
3. What price should Bentley pay?
4. What is the worst and bestcase value scenario for Bentley
based on your analysis of the financial forecast, financial
market conditions, industry structure, and analysis of the
merger?
Differences between US GAAP & IFRS Standards: Leasing
By: Carolina Wong
History of Leasing in

14. US GAAP (since 2001)
2001 - The Enron Scandal took place causing the SEC to
investigate accounting practices that could allow corporate
fraud. At this point, the SEC discovered the off-balance sheet
operating lease loophole.
2006- FASB began work on a new lease accounting standard
intended to close the loophole of off-balance operating leases.
2009 - The FASB and IASB issued a Discussion Paper
proposing that lessees capitalize all leases on the balance sheet.
2010 - The FASB and IASB issued an Exposure Draft and
distributed it for public comments. The model set forth in the
ED proposed that lessees move all leases onto the balance sheet
as a right-of-use asset and liability.
2013 - The FASB and IASB issued a Revised Exposure Draft
and opened a four-month comment period. After, the boards
solidified parts of the standard, including that all leases would
be brought onto the balance sheet, expense recognition models,
and liability measurement.
2016 - The FASB published ASC-842, the new lease accounting
standard for companies reporting under US GAAP. The IASB
issued IFRS 16 the new lease accounting standard for
companies reporting under the International Financial Reporting
Standards.
2018 - The FASB issued an update to ASC 842 to both clarify
and simplify the application of the new lease standard to land
easements. The FASB also issued a proposal to ease companies’
transition to the new standard by offering a practical expedient
that would allow companies to apply the transition provisions at
the adoption date, instead of at the earliest comparative period.
The proposal was approved in July of 2018.
Low-value asset exemption
US GAAP
There is no recognition exemption for leases based on the value

15. of the underlying asset.
IFRS
Lessees may elect, on a lease-by-lease basis, not to recognize
leases when the value of the underlying asset is low (e.g.,
US$5,000 or less when new).
Scope exemption for
intangible assets
US GAAP
All leases of intangible assets are excluded from the scope of
ASC 842.
IFRS
Lessees may apply IFRS 16 to leases of intangible assets other
than rights held by a lessee under licensing agreements within
the scope of IAS 38, Intangible Assets, for items such as motion
picture films, video recordings, plays, manuscripts, patents and
copyrights.
Lessors are required to apply IFRS 16 to leases of intangible
assets, except for licenses of intellectual property that are in the
scope of IFRS 15.
Lease liability reassessment
of variable lease payments
US GAAP
Changes in variable lease payments based on an index or rate
result in a remeasurement of the lease liability when the lease
liability is remeasured for another reason (e.g., a change in the
lease term).
IFRS
Changes in variable lease payments based on an index or rate
result in a remeasurement of the lease liability whenever there
is a change in the cash flows (i.e., when the adjustment to the
lease payments takes effect).

16. Determination of the discount
rate
US GAAP
Lessees and lessors determine the discount rate at the lease
commencement date.
IFRS
Lessees determine the discount rate at lease commencement, but
lessors determine the rate implicit in the lease at the lease
inception date.
Determination of the discount
rate
US GAAP
Lessees and lessors determine the discount rate at the lease
commencement date.
IFRS
Lessees determine the discount rate at lease commencement, but
lessors determine the rate implicit in the lease at the lease
inception date.
Lessee & Lessor lease classification
US GAAP
Recognized leases are classified as either finance or operating.
Lessees classify leases at the lease commencement date.
Leases are classified as operating, direct financing or sales-type
leases at the lease commencement date.
IFRS
All recognized leases are accounted for similarly to finance
leases under ASC 842.
Leases are classified as operating or finance leases at the
inception date of the lease.

17. Lessee Accounting:
Short-term leases — existence
of a purchase option & change in
lease term
US GAAP
A lease may not qualify as a short-term lease if it includes a
purchase option that is reasonably certain to be exercised.
A lease no longer qualifies as a short-term lease when there is a
change in a lessee’s assessment of either of the following:
The lease term so that, after the change, the remaining lease
term extends more than 12 months from the end of the
previously determined lease term
Whether the lessee is reasonably certain to exercise an option to
purchase the underlying asset
IFRS
A lease may not qualify as a short-term lease if it includes a
purchase option, regardless of whether the lessee is reasonably
certain to exercise the option.
A change in the terms of a short-term lease creates a new lease.
If that new lease has a lease term greater than 12 months, it
cannot qualify as a short-term lease.
Lessor Accounting:
Recognition of selling profit
for direct financing leases
US GAAP
Selling profit on direct financing leases is deferred at lease
commencement and amortized into income over the lease term.
IFRS
IFRS does not distinguish between sales-type and direct
financing leases. Selling profit on finance leases is recognized
at lease commencement.

18. Lessor Accounting:
Recognition of selling profit
for direct financing leases
US GAAP
Selling profit on direct financing leases is deferred at lease
commencement and amortized into income over the lease term.
IFRS
IFRS does not distinguish between sales-type and direct
financing leases. Selling profit on finance leases is recognized
at lease commencement.
Lessor Accounting:
Collectability
US GAAP
Collectability of the lease payments is assessed for purposes of
initial recognition and measurement of sales-type leases. It is
also evaluated to determine the income recognition pattern of
operating leases.
IFRS
IFRS 16 does not include explicit guidance for considering
collectability of lease payments.
Gain or loss recognition in sale and leaseback transactions
US GAAP
The seller-lessee recognizes any gain or loss, adjusted for off-
market terms, immediately.
IFRS
The seller-lessee recognizes only the amount of any gain or
loss, adjusted for off-market terms, that relates to the rights
transferred to the buyer-lessor.

19. Leveraged leases
US GAAP
Leveraged lease accounting is eliminated for leases that
commence on or after the effective date of ASC 842. However,
leveraged leases that commenced prior to the effective date are
grandfathered. If an existing leveraged lease is modified on or
after the effective date, the lease would no longer be accounted
for as a leveraged lease but would instead be accounted for
under ASC 842.
IFRS
The seller-lessee recognizes only the amount of any gain or
loss, adjusted for off-market terms, that relates to the rights
transferred to the buyer-lessor.
Final Term Project
Prepared by:
Carolina Wong
for
Professor C.E. Reese
in partial fulfillment of the requirements for
ACC 508 International Accounting
School of Business/ Graduate Studies
St. Thomas University

20. Miami Gardens, Fla
Term Fall 1/ Fall, 2019
.
Outline Final Term Project
Carolina Wong
1. Introduction
0. Objective of Research Project.
0. Organization of text.
1. U.S. GAAP Accounting Standards for Presentation of
Financial Statements.
1. Standard
1. Illustrative Case.
1. IFRS Accounting Standards for Presentation of Financial
Statements.
2. Standard
2. Illustrative Case.
1. History of Convergence for Presentation of Financial
Statements.
3. US GAAP Convergence
3. IFRS Convergence
3. Convergence between US GAAP and IFRS.
1. Current Similarities and Differences for Presentation of
Financial Statements.
4. Similarities:
4. Differences

21. 1. Expectation of Greater Convergence for Presentation of
Financial Statements.
1. Summary and Conclusions
1. References/ Bibliography
1. Deloitte Guidelines for 842 Leases
1. IFRS website http://www.ifrs.com/
1. https://explore.leaseaccelerator.com/history-lease-
accounting/
1. https://www.cfo.com/lease-accounting/2019/05/new-lease-
standard-comparing-ifrs-and-u-s-gaap/