However, for governments with traditional fixed-term leases
, hopefully this article will make the main features of the new standard a little easier to understand and enable a smoother, less stressful transition.
Interestingly, the ED proposes a rather ingenious conceptual solution to the dilemma posed by I) requiring all fixed-term leases
to be recorded as liabilities on the balance sheet, but 2) avoiding the front-loading of expense recognition that previously resulted from capitalizing a lease.
Traditional valuation approaches that have been used for conventional fixed-term leases
are not appropriate for pricing flexible leases.
As common hold will replace fixed-term leases
, owners will not be confronted with the problem of wasting assets as leases run down.
Late in 2002 St Modwen bought the Alstom Transport train making site at Washwood Heath in Birmingham as part of a pounds 111 million sale and leaseback deal with the debt-laden French group, which took fixed-term leases
of between five and 15 years on most of the properties.
The debt-laden French group sold its UK real estate portfolio, 19 properties, providing 8 million sq ft on 50 acres, to take fixed-term leases
of between five and 15 year.
Alstom has taken fixed-term leases
of between five and 15 years on most of the properties and said there would no be operational impact on Washwood Heath, where hundreds of workers are employed.