Real Estate
Real Estate: FASB Proposes Significant Changes to Accounting for Leases
December 17th, 2010 4:06 PM
On August 17, 2010, the FASB issued an exposure draft for a proposed accounting standards update for leases. The exposure draft proposes a significant change in the accounting for leases. The proposed lease accounting would require all leases to be recorded on the balance sheets of both the lessee and the lessor, similar to the current accounting for capital leases. Lessees will recognize an asset for the right to use the leased asset, and a liability at the present value of future lease payments. The resulting asset and liability would be amortized to expense on a systematic basis. The proposed lessor accounting consists of either a performance obligation approach or a derecognition approach depending on whether the lessor retains the significant risks or benefits related to the leased asset.
The exposure draft also requires additional footnote disclosure of leasing activities. The comment period for the exposure draft ended December 15, 2010. The exposure draft did not indicate an effective date. If the current provisions of the exposure draft are adopted, the resulting lease accounting could have a significant effect on company’s balance sheet, net income, EBITDA, financial ratios and debt covenants.
To read the complete article regarding the proposed standards update for leases, please click here.
The contents and opinions contained in this article are for informational purposes only. The information is not intended to be a substitute for professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you may have regarding your financial goals.
Posted by James Jackson | 0 Comment(s)
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