The IASB and the FASB's discussion on leases and discussed subsequent measurement issues relating to lessees, including foreign exchange differences, impairment, revaluation and residual value guarantees.

Foreign exchange differences

The boards discussed the accounting by lessees for leases denominated in a foreign currency. The boards tentatively decided that foreign exchange differences related to the liability to make lease payments should be recognised in profit or loss, consistently with foreign exchange guidance in existing IFRSs and US GAAP. 13 IASB members and all FASB members agreed.

Impairment

The boards discussed impairment of the lessee's right-of-use asset. The boards tentatively decided to reaffirm the proposal in the exposure draft to refer to existing guidance in IFRSs and US GAAP for impairment of the right-of-use asset.

All board members present agreed.

Revaluation (IASB only)

The IASB discussed revaluation of the lessee's right-of-use asset. The IASB tentatively decided to reaffirm the proposals in the Leases exposure draft allowing revaluation of the right-of-use asset. All IASB members present agreed.

Residual value guarantees

The boards discussed the subsequent measurement of residual value guarantees by lessees (excluding guarantees provided by an unrelated third party) and tentatively decided that:

• The amounts expected to be payable under residual value guarantees included in the measurement of the lessee's right-of-use asset should be amortised consistently with how other lease payments that are included in the measurement of a right-of-use asset are amortised. That is, amortisation should be on a systematic basis from the date of commencement of the lease to the end of the lease term, or over the useful life of the underlying asset, if this is shorter. The method of amortisation should reflect the pattern in which the economic benefits of the right-of-use asset are consumed or otherwise used up. If that pattern cannot be determined reliably, a straight-line amortisation method should be used. All board members present agreed.
• The amounts expected to be payable under residual value guarantees that are included in the measurement of the lessee's liability to make lease payments should be reassessed when events or circumstances indicate that there has been a significant change in the amounts expected to be payable under residual value guarantees. An entity would be required to consider all relevant factors to determine whether events or circumstances indicate that there has been a significant change. All board members present agreed.
• The amount of the change to the lessee's liability to make lease payments arising from changes in estimates of residual value guarantees should be recognised (a) in net income to the extent that those changes relate to current or prior periods and (b) as an adjustment to the right-of-use asset to the extent those changes relate to future periods. The allocation for changes in estimates of residual value guarantees should reflect the pattern in which the economic benefits of the right-of-use asset will be consumed or were consumed. If that pattern cannot be determined reliably, an entity should allocate changes in estimates of residual value guarantees to future periods. 12 IASB members and all FASB members agreed.

Revenue recognition

The IASB and the FASB discussed how an entity should account for the costs of products manufactured for delivery under long-term production programs. The boards noted the potential to improve and converge the financial reporting for those costs. However, they agreed that the accounting for those costs is not in the scope of the revenue recognition project.