By Jason Bramwell
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.
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.
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.
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.