1. International Financial Reporting Standards The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation. © 2012 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org Leases: Project update United Leasing Association (Russia) April 2012

2. Why a leases project? Existing lease accounting does not meet users’ needs –accounting depends on classification –contractual rights and obligations (assets and liabilities) are off balance sheet –users forced to adjust financial statements Complexity –dividing line between finance and operating is arbitrary –is there an underlying principle? 2

3. Where we are 3 2009 20102012TBD March 2009 Discussion Paper Leases: Preliminary Views August 2010 Exposure Draft Leases H2 2012 Second Exposure Draft Leases TBD Final Standard Leases Comment period 4 months 786 comment letters received Contained proposals for both lessees and lessors Re-expose proposals Focus on revisions to 2010 proposals Will contain proposals for both lessees and lessors Effective date: TBD Will contain guidance for both lessees and lessors Comment period 4 months 302 comment letters received Primarily focused on lessee accounting

4. Proposed right-of-use model A lease contract is one in which the right to control the use of an underlying asset is transferred from the lessor to the lessee. 4 LessorLessee Right of use

5. 2010 ED proposals for lessees Right of use accounting model: Lessee has acquired the right to use an underlying asset and is obligated to pay for that right with its lease payments. 5 Right of use model for lessees Balance SheetIncome Statement Right-of-use assetXAmortisation expenseX Liability to make lease payments* XInterest expenseX * Discount at rate lessor charges the lessee or lessee’s incremental borrowing rate if lessor rate not available.

6. Why a right-of-use model? Reflects assets and liabilities arising in leases on the balance sheet Consistent with Conceptual Framework’s definition of assets and liabilities One accounting model for all leases – consistency and comparability Can be applied to all leases without arbitrary ‘bright lines’ 6

7. Redeliberations–lessee model General support for a right-of-use model –Basic lessee accounting principle widely accepted, ie leases create assets and liabilities Feedback –‘front-loading’ expense in P&L –elimination of rent expense Considered a dual accounting approach –finance lease (in-substance purchase)–as ED –other than finance lease (operating lease)–on balance sheet, but straight-line rental expense Discussion to eliminate frontloading reopened in February 2012 7

8. Feb 2012: Lessee accounting approaches 8 Approach A: retain current tentative decisions (model proposed in 2010 ED) Use different amortisation method for ROU asset Approach B: interest- based amortisation Approach C: underlying asset

9. 2010 ED–lessor accounting 9 Does the lessor retain significant risks or benefits of the underlying asset? Derecognition approach: Derecognise underlying asset Recognise residual asset Profit on amount derecognised and interest income Performance obligation approach: Recognise underlying asset Recognise performance obligation Lease income, depreciation and interest income NoYes Both approaches: recognise lease receivable

10. Redeliberations–lessor model 10 All leases (except short-term leases and leases of investment property) Balance SheetIncome Statement Right to receive lease payments* XProfit on transfer of right-of-use (gross or net based on business model) X Residual asset**XInterest income—on receivable and residual*** X *Plus initial direct costs ** Measured at an allocation of carrying amount of underlying asset *** Interest on residual based on estimated residual value—any profit on the residual asset is not recognised until asset sold or re-leased at end of lease term.

11. Redeliberations–investment property Accounted for similar to today * Lessor measures IP at fair value or cost ** Rental income recognised on a straight-line basis or another systematic basis, if more representative of pattern of earning rentals ***If IP measured at cost, rental income plus depreciation recognised **** If IP measured at fair value, rental income plus fair value changes recognised 11 Leases of investment property (IP) Balance SheetIncome Statement Investment property *XRental income **X Depreciation ***, or(X) Fair value changes ****X/(X)

12. Application example–equipment lease Assumptions and workings: 12 Fair value of leased assetCU1,000 Carrying amount of leased asset CU950 Lease term5 years Residual (future value)CU500 Residual (present value)CU374 Rents (annual in arrears)CU149 Rate implicit in lease6% Initial direct costsnone PV of lease payments = Lease receivable CU626 Total profit on transaction = FV of UA – CA of UA 1,000 - 950 = 50 Profit on ROU = lease rec/FV of UA * Total profit 626/1,000 * 50 = 31 Unearned income (profit relating to residual) = total profit – profit on ROU 50 – 31 = 19

13. Application example–equipment lease continued 13 Periods012345 Balance sheet Receivable626515 397 273 140 0 Gross residual asset 374 396 420 445 472 500 Unearned income (19) Net residual asset 355 377 401 426 453 481 Income statement Gain on sale 31 - - - - - Interest on receivable - 38 31 24 16 8 Unwinding interest for residual asset - 22 24 25 27 28 Total lease income 31 60 55 49 43 37

14. Reducing complexity and cost 14 2010 EDPost-ED simplifications Options to extend the lease term (term options) Longest possible lease term more likely than not to occur Reassessed Option period included if lessee has significant economic incentive to exercise Reassessed other than for market conditions Variable lease payments Included in lease liability on probability-weighted basis Reassessed Excluded from liability (unless in- substance fixed or based on an index or rate) and accounted for as occurred Reassessed for spot/index Short–term leases (lease term ≤ 12 months) Liability/asset recognised with no discounting No liability/asset recognised Rent expense IAS17 operating lease model

15. Redeliberations–definition of a lease ‘Contract in which the right to use an asset (the underlying asset) is conveyed, for a period of time, in exchange for consideration’ –underlying asset=identifiable (physically distinct) –right to control use of underlying asset Notion of control changed –‘ability to direct the use’ and receive benefits –change from EITF 01-8/IFRIC 4/ED: if entity obtains substantially all output ≠ control –pricing does not determine control 15

16. Redeliberations–lessee other issues Multi-element contracts –separately account for non-lease elements –allocate between lease and non-lease elements if there are observable prices Lessee residual value guarantees –include in lease payments amounts expected to be payable Sale and leaseback transactions –if sale, account for as sale then leaseback 16

17. Redeliberations–lessor other issues Impairment –financial asset impairment guidance for receivable –non-financial impairment guidance for residual asset Residual value guarantees –not recognised separately –considered when assessing residual asset for impairment Multi-element contracts –separately account for non-lease elements –allocate using revenue guidance (selling price) 17

18. Redeliberations–lessee presentation Balance sheet –RoU asset presented as if owned –Liability to make lease payments Statement of cash flows –principal  financing –interest  as other interest payments are presented –variable lease payments not included in RoU asset:  operating –short-term lease payments  operating 18

19. Redeliberations–lessor presentation Balance sheet Statement of cash flows –cash inflows from leases  operating activities 19 on the face or notes on the face

20. Redeliberations–lessor disclosure Reconciliation of lease receivable and residual asset Maturity analysis A table of all lease income, including short-term Details of contingent rentals and options Details of purchase options Details on residual asset risk management including quantitative exposure Similar requirements for investment property lessors scoped out of receivable and residual approach 20

21. Redeliberations–transition 2010 ED proposals gave rise to front-loading for lessees Revised approach –Retrospective application with simplifications in determining the rate and calculations –Use of hindsight –Grandfathering of finance leases –Option to apply without simplifications 21

22. What happens next? 22 2-3Q 2012 H2 2012 TBD Redeliberations Publish Revised Exposure Draft* Consultation Issue Final Standard Outreach Working group meetings Redeliberations Comment letter period TBD Effective date: TBD Outreach Redeliberations – lessee subsequent measurement

23. Where to go for more information 23 IASB websitewww.ifrs.org Contact details Project teamInvestor liaison Patrina BuchananAida VatrenjakJess LionHilary Eastman pbuchanan@ifrs.orgavatrenjak@ifrs.orgjlion@ifrs.orgheastman@ifrs.org

24. Questions or comments? Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation. 24