The potential changes in lease accounting rules coming in 2012 will have seismic consequences for the balance sheets of public companies. Operating leases will likely be replaced by capital leases, resulting in the shift of trillions of dollars to balance sheets of companies worldwide. With all leases for commercial real estate being capitalized in this way, the debt of most companies will increase dramatically.
The International Accounting Standards Board (IASB) and the U.S.-based Financial Accounting Standards Board (FASB) have made extensive changes to the exposure draft, released in August 2010. The boards said the changes would result in a more consistent approach to lease accounting and would improve the quality of financial information available to investors.
They released an Exposure Draft of the Proposed Accounting Standards Update on October 14th with an invitation for comments by Dec. 13th: “The Board invites individuals and organizations to send written comments on all matters in this Exposure Draft of a proposed Accounting Standards Update. Responses from those wishing to comment on the Exposure Draft must be received in writing by December 13, 2011. Interested parties should submit their comments by email to email@example.com, File Reference No. 2011-190. Those without email should send their comments to ―Technical Director, File Reference No. 2011-190, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.‖ Do not send responses by fax.”
A schedule of the proposed Proposed Accounting Standards Update documents can be found on the FASB website.
Rest assured that we are closely monitoring this process and are working to make sure REportfolio will have the tools necessary to comply with the new regulations when they’re officially released next year.