Revised lease accounting exposure draft is out (5-13)

FASB and IASB have released a new draft of the changes to lease accounting.

I haven’t worked through the ED yet. I’m guessing at this point you are just wanting the news flash.

So in extremely condensed terms, here’s the deal:

  • Essentially all leases will be brought on the balance sheet.
  • Leases with a term of one year or less won’t be capitalized.
  • Leases of longer-lived assets, such as real estate, show straight line amortization (type B).
  • Leases that use up much of the value, such as equipment, show interest method amortization of liability (type A).
  • If lease rate is adjusted by an index such as CPI the asset and liability will be adjusted each year.

We will soon be talking about Type A and Type B leases.

Effective date isn’t mentioned in the ED but speculation is maybe 4 years out.

The ED is available here. It’s 343 pages long, so get a big cup of coffee before you sit down to read it.

Here are two articles summarizing the new rules:

Here is one of the many rebuttals that caught my eye:

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