The Lease Standard Train is Back on Track
By Theresa Hickman-Oracle on Jun 19, 2012
As I was walking to the elevator, I ran into Seamus Moran, our resident accounting expert.
Me: “Hi Seamus, where have you been? You don’t write, you don’t call, and you don’t send me flowers. I’ve been hearing more and more about the Lease Accounting topic. It looks like Congress is weighing in on it too and putting heat on FASB.
According to a recent article in Reuters “representatives Brad Sherman, a Democrat, and Republican John Campbell, have written to the U.S. Financial Accounting Standards Board warning of dire economic fallout from a plan to have companies put leases on their balance sheets."
Here’s what Seamus had to say:
Yes, but there have been some recent developments. The FASB and IASB cleared a logjam, resolved a final “content of the standard” issue, and articulated a way to move forward on Leases last Wednesday. It looks like the Lease Standard Train is back on track. We’ve just had a briefing from PwC.
The Lease timeline now looks like this:
Now to June 2012: The staff will write up the decisions
June 2012: Boards will meet on “logistical” issues (glossed over)
Oct, Nov, most likely December 2012: A New Lease Exposure Draft will be crafted
January – April 2013: Public Comment period begins
April to September 2013: Everyone to digest the comments and draft the final standard
End of 2013 (Probably more like Early 2014): Publish the new Lease Accounting Standards
2015: Retroactive reporting
2017: New standard is effective
It seems that leases under one year will be treated as “rent expense”. If it doesn’t cross two (annual) balance sheets, it doesn’t really matter.
This is good news in terms of clarity, resolution, and moving forward on one of the last remaining items to converge the IFRS and U.S. GAAP standards. There are ambiguities, issues, concerns, et cetera, of course, and there are bright lines (“rules”) that bother the “no rules, please” people and ambiguities (“judgments”) that bother the “clarity, please” people, but at least the train isn’t falling off the tracks.