Overcoming the Five Stages of Lease Accounting Grief
When Thomson Reuters reported late last year that the Financial Accounting Standards Board (FASB) had proposed an eighth round of changes to lease accounting rules1, accounting and finance execs around the country channeled their inner Charlie Browns with a collective, “Good grief!” The grief is understandable, although we’re not sure how “good” it is. The […]
Sorry, Lease Accounting Rules Don’t Care That You’re Trying to Keep Patients Alive
The Wall Street Journal recently checked in with the CFO of Genesis Healthcare to see how the transition to the new lease accounting standard is going. Not good, apparently: Genesis Healthcare Inc., a Kennett Square, Pa.-based post-acute health-care provider, for instance, had to chase down hundreds of small equipment leases, finance chief Tom DiVittorio said. Mr. DiVittorio […]
Sorry, Public Companies, the FASB Isn’t Giving You Any More Time to Get Your Shit Together on Lease Accounting
The chairman of the Financial Accounting Standards Board crushed any hopes public companies might have that the FASB would delay the Jan. 1, 2019, start date for its new lease accounting standard. At #AICPA conference, FASB Chairman Russ Golden is asked: Considering system challenges, new guidance, auditor concerns about #internalcontrols, will #FASB delay #leases standard? […]
New Leases Standard About to Really Blow Up Drug Store Chains’ Balance Sheets
We are T-minus 155 days away from financial executives at U.S. public companies saying a couple of Hail Mary’s, keeping their fingers and toes crossed, and hitting the “go” button on adopting new accounting rules for reporting leases. Accounting Today reported that two popular drug store chains top the list of Fortune 1000 companies with […]
Twitter’s Latest 10-Q Is a Perfect Example of Why No One Wants New Lease Accounting
We all know Twitter — like a lot of "successful" tech companies — isn't exactly making profits hand over fist despite decent revenue but did you know how bad their lease situation is? Spoiler alert: it's bad. In their latest 10-Q filed with the SEC a few days ago, we find the following: So total […]
IASB Backtracks on Lease Accounting But Definitely Not Because of FASB
Funny that the IASB and FASB working together on a new lease accounting standard was totally kumbaya up until recently, when everything fell apart and both sides realized this convergadoption thing is totally never going to happen. Too bad, joining forces on revenue recognition made it seem so likely despite the fact that everyone including […]
Companies Wanting More Liabilities on Their Balance Sheets Will Love the New Lease Accounting Proposal
What's that you say, Hans? No one wants more liabilities on their balance sheet? "Obviously, this standard is not a very popular one," IASB chief Hans Hoogervorst said in a conference call. "Generally, companies like off-balance-sheet financing" and the standard will put an end to a major part of it, he said. Well, that's […]
It’ll Be Nothing Short of a Miracle for Meaningful Lease Accounting Reform to Become Reality
Since FASB Statement No. 13 was issued in the mid-70s, businesses have managed to develop a lot of creative ways for classifying some of their future obligations as operating leases, thus keeping those debts off their balance sheets. That's handy for all kinds of reasons, but some people think that it's a very bad thing. Solution? […]
Lease Accounting Survey Highlights Growing Demand for Competent Survey Writers
Thank you, readers, for forwarding your spam to us. @going_concern Kindly help me complete this survey on the proposed lease reforms surveymonkey.com/s/LKFDN8P — MachO (@bakersavi) September 24, 2012 The best way to complete the survey is to click the delete button located near the top of your Outlook window. But don't worry. A less optimal […]
Good Riddance to Old Lease Accounting Rules
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
I see that FASB is sticking to its schedule for ending most off-balance-sheet treatment for leases, and so is the IASB. It’s about time, frankly, if only to spare us poor, I mean, intrepid financial journalists from having to sort through the particulars of the current accounting treatment a moment longer than necessary.
I speak from personal experience here, having wrestled with the false distinction between capital and operating leases for a sidebar to a piece I wrote for CFO Magazine way back when. The article delved into the details of a particularly complex variation that companies were using to finance real estate, called synthetic leases.
I swear, that sidebar itself shaved a year off my life, and at my age, every one counts, and did even a decade or so ago.
In fact, the hoops that companies must jump though to get a deal to qualify as an operating lease still make my head spin. Consider: In order to qualify, the current rule, known as FAS 13, requires that the lease fail all of four tests aimed at distinguishing the financing from being the equivalent of ownership.
The thing that puzzled me about all this is that many, if not most, CFOs claimed that accounting treatment wasn’t the reason, or at least not the main one, that they used such financing techniques in the first place.
But the reason they gave often came down to their advantageous cost, and like all off-balance-sheet financing techniques, I could never quite understand how that lower cost arose without the accounting treatment.
After all, it seemed to me the only reason operating leases were less expensive than capital leases was that the underlying asset wasn’t counted as the property of the company by a sufficient number of investors willing to therefore pay a premium for the company’s equity. And if they did that, they were ignoring the fact that the asset was indeed the property of the company on anything other than a narrow, legal basis, and that the arrangement wasn’t financing its purchase.
So tell me again how off-balance-sheet financing results in lower cost if it doesn’t really do that.
Accounting News Roundup: Tweedie’s Final Months; Lease Accounting Proposal Coming Soon; UCF Accounting Student’s Body Found | 08.16.10
Goldman CFO Viniar Gets $4.5 Million Options Windfall [Dow Jones]
“Goldman Sachs Group (GS) Chief Financial Officer David Viniar received $4.5 million by exercising more than 67,000 options as part of the investment bank’s disclosure Friday with the Securities and Exchange Commission.
According to the filing, Viniar was among six top executives who have converted s ing stock options into a windfall of $24 million, cashing in on benefits they received years before the government’s 2008 rescue of the nation’s biggest financial firms.”
Tweedie faces greatest challenge in last days [FT]
“Sir David Tweedie says his staff are concerned about what he might do in his last months as head of the International Accounting Standards Board, the powerful global rule setter that he has chaired for a decade.
‘I think people are quite worried about how I might do in my last six months here, with all my vendettas and all these grudges I’ve been storing up . . . I think they are worried that I might let them go,’ he says with a laugh.”
Rulemakers Plan Global Overhaul of Lease Accounting [Reuters]
“U.S. and international accounting rule makers are planning to propose an overhaul of lease accounting as soon as Tuesday, in a move expected to affect some $1.2 trillion in leased assets.
Traditionally, accounting rules have given companies a lot of leeway in how they record leases for assets ranging from store locations and restaurant equipment to airplanes and machinery. As a result, only certain types of leases appear on the balance sheet, while a majority of a company’s leases can often be kept off the balance sheet and hidden from an investors’ view.
But the Financial Accounting Standards Board, which sets U.S. accounting rules, and the London-based International Accounting Standards Board, which writes accounting rules for more than 100 countries, will aim to change all that this week by proposing to bring many of these assets onto corporate balance sheets.
‘It’s something that needs to be done,’ said John Hepp, a partner in accounting firm Grant Thornton’s professional standards group. ‘Lease accounting is broken.’ ”
Hunt for IASB head hits hurdle [FT]
“The search for a successor to Sir David Tweedie, chairman of the International Accounting Standards Board, which sets accounting rules for most of the world outside the US, has hit difficulty in the face of opposition in Europe to how the process has been conducted.
Sir David has presided over deteriorating relations since the financial crisis, with some senior European officials raising concerns about the transparency of his decision-making amid criticism that he has prioritised an effort to get the US to adopt international rules at the expense of European interests.”
PricewaterhouseCoopers taps Kevin Kelly to head Birmingham office [Birmingham News]
Kevin Kelly is new the managing partner for PwC’s Birmingham office. He replaces David Pickett who is the new OMP in Nashville.
UCF accounting student killed [Central Florida Future]
“Orange County Sheriff’s officials have released the names of the two people who died Saturday in an apparent murder-suicide, after a woman was found dead in an apartment about five miles south of UCF, and a man was found dead at a local shooting range.
Jennifer Lynn Roqueta, an accounting major at UCF who had just turned 21 in May and a server at Buffalo Wild Wings in Waterford Lakes, was identified as the victim on Sunday.
The suspect, who was identified as Ryan Ray Scurlock, 24, was found at the Shooting Gallery gun range located at 2911 39th St. in Orlando.
The investigation stems from Saturday’s incident in which the OCSO received several calls from Scurlock’s acquaintances requesting they check on his well-being because they had received alarming text messages from him that indicated he was distraught.”
Former Fed official joins KPMG [WaPo]
Jon Greenlee is joining the Tyson’s Corner office as a managing director in KPMG’s financial services regulatory practice. He previously worked as an associate director of risk management in the Fed’s division of banking supervision and regulation.
Satyam auditors to face Sebi probe [Hindustan Times]
“Accounting firm PricewaterhouseCoopers (PwC) will have to face an inquiry by the Securities and Exchange Board of India (Sebi). The Bombay High Court on Friday dismissed PwC’s petition challenging Sebi’s show-cause notice dated June 30, 2009 seeking to prohibit PWC from auditing accounts of listed companies.”
That’s not a tax bill, THIS is a tax bill: Crocodile Dundee star Paul Hogan hit with £8m in charges [Daily Mail]
“But in a American TV interview last year, Hogan, 70, vowed that the taxman would not get a penny more of his money and added: ‘Come and get me, you miserable b******s.’ ”
Eide Bailly merges with R T Higgins [Denver Business Journal]
Top 25 firm Eide Bailly’s merger with RT Higgins brings the the firm’s total staff to over 1,200 in nine states.
‘Dear friends at the FASB: I am concerned that you good folks have lost touch with reality’
Today, in cheeky comment letters to accounting rulemakers.
FASB Letter_good Folks