During the past few years, as part of their joint project convergence, the Financial Accounting Standard Board (FASB) and International Accounting Standards Board (IASB) have entered into lengthy deliberations on lease accounting.

The deliberations have drawn attention to the IASB allowing in certain circumstances a lessor of investment properties to measure its investment properties at fair value under IAS 40, Investment Property. Because US generally accepted accounting principles (GAAP) do not provide an option to measure investment properties at fair value, the FASB added a project to decide whether to permit or require investment properties to be carried at fair value. The objective of this project is to consider if entities should be given the option or be required to measure an investment property at fair value through earnings.

At their most recent meeting in May, the FASB discussed presentation and consolidation issues related to investment property entities and decided:

• An investment property entity should present the following items separately on the face of the financial statements related to investment property investments: (a) rental income; (b) rental expenses; (c) fair value of investment properties; and (d) debt; and

• An investment property entity would be prohibited from consolidating controlling interests in noninvestment property entities unless the controlling interest is in an operating entity that provides services to the investment property entity.

Also during the meeting, the FASB decided to refine the definition of an investment property entity to state that its primary business activities relate to investing in real estate properties.

The FASB is currently drafting a proposed Accounting Standards Update concerning the investment properties project. The staff draft is expected to discuss conclusions reached to date. Please visit the FASB website to view the Summary of Decisions Reached to Date for this project.

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