Accounting Newsflash May 2017: ED PSAK 73 - Overhaul of Lease Accounting for Lessee

ED PSAK 73 - Overhaul of Lease Accounting for Lessee

This publication highlights the recently published exposure draft (“ED”) of PSAK 73 Leases, which adopts IFRS 16 Leases.

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This ED will fundamentally change the accounting treatment of leases by lessees, in that it eliminates the current dual accounting model for lessees and replace it with a single accounting model that is similar to current finance lease accounting under PSAK 30.

Lessor accounting remains similar to current practice – i.e. lessors continue to classify leases as finance and operating leases— although this ED requires lessors to provide enhanced disclosures about their risk exposure e.g. residual value risk.

This ED will supersede PSAK 30 and the following interpretations: ISAK 8, ISAK 23, ISAK 24, and ISAK 25.

ISAK 25 will be revoked by way of incorporating the notion of distinguishing a lease and sale or purchase of an asset—for a contract that grants the rights which represents in-substance purchase of a property, plant or equipment—into the Basis for Conclusions of ED PSAK 73, which is relevant for accounting for land rights in Indonesia.

ED PSAK 73 is expected to be effective from 1 January 2020. Early adoption is permitted only if entities had applied ED PSAK 72 Revenue from Contracts with Customers.

 

They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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