Although the FASB has an unusually large number of proposed standards in progress, no single topic has drawn the attention of the lending community comparable to the proposed leasing standard. This is no surprise given the potential impact on balance sheets, income statements and debt covenants. So where does this topic stand?

 

Recent activity has focused on interested parties submitting comments to the FASB for its consideration. Of particular note, the Financial Reporting Executive Committee (FinREC) of the American Institute of Certified Public Accountants (AICPA) submitted it comment letter on December 28th. The contents of its 22-page letter can be summarized as follows:

  Support for a single approach to lease accounting; i.e. elimination of operating vs. capital lease considerations.
  Agree that assets and liabilities should be presented on balance sheets.
  Believe that there are a significant number of conceptual and practical matters to be considered and revised to make the broad concepts workable.
  Disagree with some significant aspects of lessor accounting as proposed.

 

Concurrent with the FASB's proposal as discussed above, the International Accounting Standards Board (IASB) has also proposed a similar standard. We understand that the IASB has received comments along similar lines as to the need for a reworking of some provisions.

 

What does this all mean? Those impacted should continue to expect significant changes in lease accounting versus current practice. We do not believe final changes will alter the basic framework underlying the proposal. It is possible the significant implementation concerns may delay the timing of a final standard from the current mid-2011 expectation.

The above are the views of the author. If you would like more information on this topic, please contact your representative at Kieckhafer Schiffer & Co. or Mark Merriman.

 

       
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