Lease Accounting Problems Dominate Restatements

Errors in lease accounting contributed to 22.5 percent of the weaknesses reported to the Securities and Exchange Commission (SEC) in April. During March, less than 10 percent of weaknesses reported were due to errors in lease accounting.

According to Compliance Week magazine, many of the disclosures came after Donald Nicolaisen, chief accountant for the SEC, sent a letter clarifying lease accounting rules to Robert Keupers, chairman of the Center for Public Company Audit Firms, an arm of the American Institute of Certified Public Accountants (AICPA). The letter focused on three lease accounting related issues:

  • Depreciation of costs for improving leased property
  • Recognition of periods of free or reduced rents
  • Landlord incentives for making improvements

Fifty-eight companies disclosed material weaknesses in their internal controls over financial reporting during April.

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