The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have given relief to lessees in response to the coronavirus (COVID-19) pandemic. However, it is not clear why any relief from the requirements in International Financial Reporting Standards (IFRS) or the Accounting Standards Codification (ASC) should be necessary. The purpose of this paper is to highlight weaknesses in how the IASB and FASB developed their leases Standards, and why those Standards are not robust enough to cope with a shock to the economic system.
The COVID-19 relief suspends some features of the leasing requirements rather than changing them. What if other economic or regulatory events cause the same circumstances to arise?
Have COVID-19 exposed weaknesses in the leasing standards that should have been avoided when they were developed or is COVID-19 the problem?
Analysis of actual board discussions and staff papers is unusual and provides insights into the standard-setting process.
