August 2013
Japan Leasing Association

Summary of survey conducted by JLA on the revised exposure draft Leases

PurposeTo broadly understand the views from preparers of financial statements on the revised
exposure Draft (re‐ED) issued by the IASB and the FASB.
Items
1. Lessee accounting
2. Straight‐line lease expense recognition
3. Measurement of a lease term
4. Accounting for a short term lease
5. Accounting for a lease of a non‐core asset
Companies surveyed & respondents
Companies surveyed

Respondents

Respondents/companies surveyed

Public companies

3,53851414.5%

Non‐public companies

5,688

737

13.0%

Total

9,226

1,251

13.6%

Summary
1. Lessee accounting<Do you agree to the proposal for lessee accounting?>

According to the result of the survey, the majority of the respondents disagree to the lessee accounting
proposed in the re‐ED, while the minority of the respondents agree.
Table1-1 Lessee accounting

Disagree
90.8%
0%

10%

20%

30%

40%

50%

1Agree
9.2%

60%

70%

80%

90%

100%

August 2013
Japan Leasing Association

The respondents who disagreed to the proposal in the re‐ED indicated the reasons as follows. Over 80%
of respondents, who chose either (a) or (b) below, view that the current standard should be retained.
This implies that the respondents have strong concerns associated with costs and burdensomeness if the
proposed lessee accounting in the re‐ED were implemented.
Table1-2 The reasons for disagreeing to the proposal by the boards(a) It is more reasonable to improve the disclosuresconsidering costs & practicability into account if theinformation provided under the current standard is notsufficient.

43.9%
36.4%

(b) The current lease standard is appropriate.
(c) The off‐balance sheet treatment is appropriate for alease of property as required in the current standard.

14.2%(d) If operating leases are recognized on a lessee's B/S, astraight‐line lease expense recognition is appropriate
regardless of the nature of the underlying asset.

3.0%
2.5%

(e) Others
0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2. Straight-line lease expense recognition<Which approach do you agree to, either the proposed lease expense recognition pattern inwhich the lessee recognizes lease expense on a straight-line basis or “undiscounted lease
payments approach”?>

According to the survey, the majority of companies are much more supportive of the “undiscountedlease payments approach” rather than the proposal by the boards.
Table 2-1 Straight-line expense recognition

supportive of theundiscounted lease
payments approach
78.6%

0%

10%

20%

30%

40%

supportive of supportive
the proposal of others
10.9%
10.5%

50%

60%

70%

80%

90%

100%

The reasons for being supportive of the “undiscounted lease payments approach” are as follows.
The undiscounted lease payments approach is more appropriate from the standpoint of costs, benefits
and practicability. The “undiscounted lease payments approach” is superior to the proposal by theboards from the standpoint of the rationale of depreciation method. In addition to this, there are somecompanies which prefer to choose either the proposal in the re‐ED or the “undiscounted lease paymentsapproach”, and there are some which prefer another approach where the lessee apportions interest
component of lease payments over the lease term on a straight line basis.

2August 2013
Japan Leasing Association
Table 2-2 The reasons for being supportive of the undiscounted lease payments approach(a) The undiscounted lease payments approach ismore appropriate to realize a lessee’s straight‐line
expense recognition.

83.7%(b) The proposed lessee accounting in the re‐ED would
not faithfully reflect the pattern in which thelessee expects to consume the right‐of‐use asset’s
future economic benefits.

12.6%

3.7%

(c) Others
0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

3. Measurement of a lease term
<Do you agree to the proposed measurement of a lease term in the re-ED?>

According to the survey, the majority of companies disagree to the proposal for measuring a lease term.
Table 3-1 Measurement of lease term

Disagree
89.3%

0%

10%

20%

30%

40%

50%

Agree
10.7%

60%

70%

80%

90%

100%

One of the reasons is the difficulty of determining whether the lessee has a significant economic
incentive or not.
Table3-2 The reasons for disagreeing to the proposal by the boards(a) It is difficult to determine whether the lessee has asignificant economic incentive or not.

54.9%(b) Comparability of financial statements would be
reduced because some uncertain options could
be included in the lease term.

22.9%(c) There is no any defect to the current standard.

21.2%(d) Others

1.0%
0.0%

20.0%

340.0%

60.0%

August 2013
Japan Leasing Association

4. Accounting for a short term lease<Do you agree to the proposed accounting for a short term lease?>

According to the survey, the majority of companies disagree to the proposal for the definition of a shortterm lease in the re‐ED.
Table4-1 Accounting for a short term lease

Disagree
78.5%
0%

10%

20%

30%

40%

Agree
21.5%

50%

60%70%

80%

90%

100%

One of the main reasons is as follows.
If options to extend the lease are included in determining the lease term, the proposed accounting for ashort term lease could not be applied. This is one of the main reasons why the costs associated with
applying the proposal by the boards would increase.
Table4-2 The reasons for disagreeing to the proposal by the boards(a) If options to extend the leases are included,
there are few leases to which the proposed
accounting for a short term lease could beapplied, which would be burdensome.

60.5%(b) The proposed accounting for a short termlease could not be applied to many leases,
because there are many leases where thenon‐cancelable lease term is more than one
year, which would be burdensome.

37.3%(c) Others

2.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

5. Accounting for a lease of a non-core asset<Do you agree to the proposal that there is no any distinction in accounting on the basis ofwhether the underlying asset is core to an entity’s operations?>

According to the survey, the majority of companies disagree to the proposal that there is no any practicalrelief for a lease of a non‐core asset.

4August 2013
Japan Leasing Association
Table5-1 Accounting for a lease of a non-core asset

Disagree
87.2%
0%

10%

20%

30%

40%

Agree
12.8%

50%

60%

70%

80%

90%

100%

The reasons are as follows.
The current operating lease accounting would be appropriate to a lease of non‐core asset.
It would be difficult to practically cope with the requirements without any practical relief for a lease of anon‐core asset in the lease accounting standard itself.
Table5-2 The reasons for disagreeing to the proposal by the boards(a) It is appropriate to apply the current operating leaseaccounting to a lease of a non‐core asset.

58.2%(b) There would be practical difficulties without any
practical relief in which an entity can determine
whether the proposals should be applied to its
leases based on the materiality threshold set by theentity in the standard.
(c) Others

40.9%

0.8%
0.0%

10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%5