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The Interpretations Committee discusses the application of IFRS 10 to an arrangement in which a single asset is leased to a single lessee

 24 March 2015

IFRS 10 Consolidated Financial Statements—Single-asset, single lessee lease vehicles and the assessment of control—control of a structured entity involving an operating lease and control of a structured entity by a junior lender (Agenda Papers 5 and 5A)

The Interpretations Committee discussed two tentative agenda decisions recorded at its November 2014 meeting. In each submission, a structured entity (the ‘SE’) had been created to lease a single asset to a single lessee. In one submission the lease is an operating lease; in the other it is a finance lease. The submitter whose example related to an operating lease asked whether the lessee should consolidate the SE; the submitter of the finance lease example asked whether the junior lender should consolidate the SE. In both cases that decision would be based on an assessment of which entity has power over the relevant activities of the SE. In particular, the submitters asked whether the lessee’s use of the leased asset is a relevant activity of the SE.

In November 2014, the Interpretations Committee tentatively decided not to add this topic to the agenda. In its meeting on 24 March 2015, the Interpretations Committee discussed the comment letters received on the two tentative agenda decisions.

The Interpretations Committee noted that two of the comment letters received on the tentative agenda decisions had highlighted concerns about diversity in practice on this issue. Some members of the Interpretations Committee suggested that it would be helpful to expand the wording of the tentative agenda decisions to include some of the discussion included in paragraph 15 of Agenda Paper 5 about the assessment required in such circumstances when making conclusions about control.

Accordingly, the Interpretations Committee asked the staff to bring a revised tentative agenda decision for discussion and public re-exposure to a future meeting.

Interpretations Committee work in progress update (Agenda Paper 10)

The Interpretations Committee received a report about ongoing issues that were not discussed at this meeting.

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