Current plan – short term leases amortized on interest method (topic 840)

FASB Action Alert describing the board decision to drop the straight line amortization of “other than financing” lease liabilities is described here.

Previously, the board was thinking of allowing other-than-financing lease liabilities to be amortized on a straight line method, which would have been a lot simpler for many leases used by organizations. The concept behind that treatment is a short-term lease is really just a rental, and not a purchase of an asset. Lease a copier for 1 or 2 years is rental. Lease it for 5 years and you’ve essentially used up its market value and it is really a purchase with long-term financing.

Tammy Whitehouse at Compliance Week discusses this in her post FASB, IASB Revert to One Model for Lease Accounting, which pointed me to the FASB document.

Previously discussed this change here.

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