Public Comment Period on Lease Accounting Draws Near
by Terri Eyden on
By Jason Bramwell
September 13 is the final day individuals and organizations can submit comments on the revised proposals to the guidelines for lease accounting that were published in May by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
Interested parties can use the electronic feedback form to submit a comment letter on the proposals. Comments can also be sent to the FASB by mail or e-mail (see sidebar).
"We encourage stakeholders to review and provide feedback on the revised Leases [Topic 842] proposal before the comment period ends this Friday, September 13," FASB spokesperson John Pappas told AccountingWEB. "The FASB looks forward to reviewing comments from a wide variety of stakeholders."
The FASB and the IASB also will host four joint public roundtable meetings in the next month to give individuals an opportunity to discuss the proposed lease accounting changes with the boards in further detail. An audio recording of the roundtable meetings will be made available shortly after each meeting on both organizations' websites.
The FASB and the IASB are proposing several new changes to the guidelines for lease accounting: FASB Proposed Accounting Standards Update - Leases (Topic 842) and the IASB exposure draft, Leases.
In 2005, the US Securities and Exchange Commission (SEC) issued a report on off-balance sheet activities and recommended that changes be made to the existing lease accounting requirements to ensure greater transparency in financial reporting.
Commenting on Lease Accounting Proposal
Individuals and organizations can use the electronic feedback form to submit a comment letter to the FASB on the proposed changes to the lease accounting guidelines.
Comments can also be included in a written letter sent via mail to the FASB at the following address:
File Reference No. 2013-270
401 Merritt 7, PO Box 5116
Norwalk, CT 06856-5116
If you wish to e-mail comments to the FASB, include "File Reference No. 2013-270" as the subject. Do not send responses by fax.
The deadline to submit comments is September 13.
The new lease accounting proposals aim to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations, and the risks to which it is exposed from entering into leasing transactions, according to the FASB.
Under the existing standards, for capital leases, lessees recognize lease assets and liabilities on the balance sheet, but assets and liabilities for operating leases are not reflected on the balance sheet. The new proposal would require lessees to recognize assets and liabilities arising from all leases.
Short-term leases for a period of twelve months or less would not be affected by the new proposed guidelines.
Disclosures are also being proposed that would enable investors and other users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases, as well as recommend changes to how equipment and vehicle lessors would account for leases that are off-balance sheet. The FASB believes those changes would provide greater transparency about such lessors' exposure to credit risk and asset risk.
Opponents of the new lease accounting proposals believe they will not result in a significant improvement in the quality of financial reporting and will be more complex than the current standards.
William Sutton, CAE, president and CEO of the Equipment Leasing and Finance Association (ELFA), who has been critical of the proposed lease accounting changes, again called on the FASB and the IASB to re-evaluate their overhaul of the lease accounting guidelines in a written statement on September 3.
Sutton cited an independent academic study by the American Accounting Association, Evidence that Market Participants Assess Recognized and Disclosed Items Similarly when Reliability Is Not an Issue, which was published in the July 2013 issue of The Accounting Review. He said the study concluded that increased disclosure, or more information in the footnotes of financial statements, not a drastic overhaul of the lease accounting standards, is what is needed to address the concerns outlined by the SEC.
He also referenced a meeting of the FASB Investor Advisory Committee on August 27 in which the panel concluded the proposals are not an improvement over current US Generally Accepted Accounting Principles (GAAP) and instead recommended an enhanced disclosure package instead of a one-size-fits-all solution.
"It is essential that the boards carefully consider comprehensive public input and comment before finalizing their proposal to ensure a workable lease accounting standard," Sutton said. "We urge all lessees and their financing partners and other stakeholders to submit comment letters on the exposure draft by the September 13 deadline."
On September 10, the ELFA made public the comment letter it sent to the FASB and the IASB regarding the proposed changes to the lease accounting guidelines.
You may like these other stories...
A new online pension implementation toolkit from the Governmental Accounting Standards Board (GASB) supplies preparers, auditors, and users of state and local governmental financial reports with numerous resources on pension...
State corporate income taxes edge higher, some states stand outEmily Chasan, senior editor for the Wall Street Journal’s CFO Journal, reported yesterday that state corporate income tax revenue rose 5.5 percent in the...
Read more from Larry Perry here and in the Today’s World of Audits archive.As one of the first steps in pre-engagement planning, the review of the prior year’s audit documentation is one of the most important....
Upcoming CPE Webinars
BAR is an acronym for: Boundaries, Authority and Role. This simple tool will provide participants with a solid understanding of leadership essentials to improve their performance.
This material is designed to provide a start-to-finish overview of how to plan and complete high-quality small audits efficiently.
In this session Excel expert David H. Ringstrom, CPA shares numerous techniques that you can use to work with charts more efficiently.
Key Accounting and Reporting Issues for Nonprofits No. 1: Overview and Statement of Financial Position
This material focuses on non-profit organizations organization, accounting and reporting.