The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving, and complex accounting issues. Expert News & Commentary.
By Denise Lugo
Feb. 10 — Some of the nation's trade organizations asked the Financial Accounting Standards Board to exempt private companies from applying the forthcoming lease accounting standard that's expected to be issued in late February.
In a letter dated Jan. 29, the organizations also urged FASB and its Private Company Council to disclose what private company investor interest is being addressed in the leases standard, “and what private company investors were consulted” in their discussions.
The organizations, which include the U.S. Chamber of Commerce and Financial Executives International, expressed concerns that application of the lease accounting standard would be harmful for private companies.
“We are concerned that the decision to apply the soon-to-be finalized lease accounting standard to private businesses will exacerbate complexity, not meet the needs of private company investors and harm capital formation for those businesses,” the letter states.
Asked by Bloomberg BNA Feb. 10 whether the board plans to further address the issue, a FASB spokesperson said, “we appreciate the input provided by the organizations, and will consider it as we do all comment letters.”
The forthcoming leasing standard has generated a lot of controversy because it will require companies—for the first time—to record long term lease obligations on their balance sheets . Currently, such items, worth billions in combined dollars, are kept off the balance sheet.
FASB has said the proposal would give investors, lenders and others a more accurate picture of the financial conditions of the companies to which they provide capital.
The proposal includes some accommodations for private companies relative to discount rate considerations and the effective date. For public companies, for example, the ryule would go into effect for fiscal years beginning after Dec. 15, 2018, but private companies have an additional year to apply it.
Though the standard will include some accommodations for private companies, it isn't clear that the board has gone far enough, according to viewpoints put forth in the letter.
“Such a decision would wrongly presume that users of private company financial statements would prefer capitalizing leases on balance sheet,” the letter states. “However, since users of private companies are different than public company financial statement users, in both composition and motivation, this may not be the case.”
The organizations said that requiring private companies to apply the provisions is presumptuous because the standard wasn't developed from a private company perspective, thereby heightening the potential that it won't be compatible to the needs of private company users.
“The development of the public company lease accounting standard has taken years and, while the debate has been a long time and controversial in the public company realm, it is less apparent why this standard should be applied to private companies,” the letter states.
In addition to the Chamber of Commerce and FEI, the other organizations that signed the letter include Independent Bankers of America, International Council of Shopping Centers, National Association of Realtors, and the Commercial Real Estate Development Association.
To contact the reporter on this story: Denise Lugo in Norwalk, Conn., firstname.lastname@example.org
To contact the editor responsible for this story: Laura Tieger Salisbury at email@example.com
For a copy of the letter go to: http://src.bna.com/czO
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)