The General Office of the Ministry of Finance ("MOF") has recently issued the Accounting Standards for Business Enterprises No. 21 – Leases (Revised) (Draft for Comment) (the "Draft for Comment") to solicit comments from the units concerned by February 28, 2018.
The Draft for Comment contains amendments in the following respects. First, principles in respect of identification of the leasing, the division and consolidation of the leasing are improved. Second, the previous two models available to tenants for the accounting treatment are reduced to only one. Third, principles for classifying the leasing behavior of landlords, and methods for the corresponding accounting treatment, are optimized. Fourth, adjustments are made to the accounting treatment for a deal in which the property is leased back after it has been sold, making it aligned with the rules on income. Fifth, requirements on the presentation of leasing-related items and information disclosure in this regard are made more thorough. In particular, the Draft for Comment introduces some new concepts, such as "control" and "identified assets", and lays down relevant guidelines on how to identify the leasing behavior and distinguish leasing from other services. According to the Draft for Comment, eight specific major issues for public consultation include the "definition of leasing", "the applicable scope of these Standards", "presentation", "implementation of these Standards", etc.