IASB seeks views on lease accounting amendment, M&A reporting

The board proposed an amendment to specify sale and leaseback measurement and is consulting on reporting requirements for same-group M&A deals.

The International Accounting Standards Board (IASB) issued Friday a proposal to amend IFRS 16, Leases, to specify how a company measures the lease liability in a sale and leaseback transaction — where a company sells an asset and leases the same asset back from the new owner.

It also launched a consultation on filling a gap in accounting standards for mergers and acquisitions involving companies within the same group.

The IASB said the proposed amendment to IFRS 16 would improve the standard’s sale and leaseback requirements “by providing greater clarity for the company selling and leasing back an asset both at the date of transaction and subsequently”. It would also ensure the standard is applied consistently to such transactions.

IFRS 16 currently includes requirements for how to account for sale and leaseback transactions at the time the transaction takes place, but it does not specify how to measure the lease liability when reporting after that date.

Comments on the exposure draft, Lease Liability in a Sale and Leaseback, should be made by 29 March 2021.

IFRS 3, Business Combinations

In addition, the IASB is consulting on how to fill the gap that exists in accounting standards for mergers and acquisitions involving companies within the same group — business combinations under common control.

The board explained that IFRS 3, Business Combinations, sets out reporting requirements for mergers and acquisitions. However, the standard does not specify how to report transactions that involve transfers of businesses between companies within the same group.

Currently, companies report similar business combinations in different ways — using fair-value information about the acquired company or book-value information.

The IASB’s specific suggestion is that “fair-value information should be provided when a business combination under common control affects shareholders outside the group”. That suggestion, it said, is consistent with the existing requirements in IFRS 3 for mergers and acquisitions between unrelated companies. In all other cases, the board suggests that book-value information should be provided using a single approach to be specified in IFRS standards.

IASB Chair Hans Hoogervorst said in a news release: “Stakeholders have been vocal about the need to establish requirements for business combinations involving companies under common control, particularly for listed companies or companies preparing for listing.

“Our suggested approach would give investors the information they need without imposing unnecessary costs on companies.”

The IASB issued a discussion paper, Business Combinations Under Common Control, with a 1 September 2021 deadline for comments. It also posted a fact sheet on the topic.

Oliver Rowe ( is an FM magazine senior editor.