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Possible Change to Accounting for Leases in the Pipeline

by MKS&H on Nov 18, 2010

Who will be affected by these changes?
The proposed changes apply to all leases except leases of intangible assets; leases to export or use minerals, oil, natural gas and similar non-regenerative resources; and leases of biological assets. Any company or organization that enters into a lease or originates a lease will be affected by the proposed standards update.

Why is FASB proposing this new standard?
Leasing activity in 2008 amounted to $640 billion. However, the assets and liabilities arising from many of those contracts are not shown in a lessee's balance sheet. Current standards classify leases into two categories of capital leases and operating leases. Small differences in the terms of a lease arrangement determine whether the lease assets and liabilities are reported on the balance sheet due to the tests used to distinguish between an operating and a capital lease. Thus, the results of these tests can result in an understatement of assets and...Read More >>



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