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W
HEN IT COMES
to the way the u.s. Financial Accounting
standards Board (FAsB) works, there’s nothing as permanent as
change. indeed, the set of standards that guide accounting
principles in this country are always evolving.
Currently up for discussion are new lease accounting
standards being developed in a joint project between the
FAsB and the international Accounting standards Board (iAsB).
suggested changes that seek to more closely align u.s. reporting
guidelines with the ones used outside this country were recently
“re-exposed” to the financial community here, giving interested
parties an almost unprecedented second opportunity to com-
ment. these proposed changes, as written, completely overhaul
the way leases are reported in financial statements. the new
standard would effectively eliminate all “operating leases” and
require them to be capitalized on a company’s balance sheet.
it would also replace rent payment expense reporting with
interest and depreciation expense reporting. Lessees (and
possibly lessors) would have to change fundamentally the way
they account for real estate and equipment leasing transactions,
providing more extensive financial statement disclosures than
ever before. For lessees, the new standards would also replace
rent payment expense reporting with interest and amortization
expense reporting.
Peter Bible, partner at eisnerAmper, LLP, says that the main
thing CFos must consider is how these changes will impact
on lease vs. buy decisions going forward. “Historically, the lease
vs. buy decision contained an element known as off-balance
sheet financing, which operating lease treatment provided,”
Bible explains. “under the Proposed standard, this option would
be removed as virtually all leases would be on balance sheet.
Accordingly, CFos need to focus on the economics of the
alternatives.”
New lease accounting standards promise to change
the way CFOs report leases in financial statements.
By Bari Faye Siegel
The Future Is Now
www
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studio
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Com
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2011