Although not exactly sure as to what they will be, we all know that changes to lease accounting are coming. To emphasize this point, the FASB and IASB are talking tough regarding sticking to the proposed 2009 timetable. There even appears to be support for changes growing among senior finance executives, according to a national survey conducted by Grant Thornton LLP. In this survey, 63% of the executives responded “Yes” when asked, "Should lease accounting rules be revised to give investors more transparency?". This percentage was in line with the response to the question of, "Do we need greater transparency in financial reporting?", which was 65% in the affirmative.
The question I have is “How are these changes going to fit into the concept of principles-based accounting?” (Principles-based accounting suggests that the accounting for a transaction should be based on a broad conceptual framework, rather than bright-line tests.) I have no problem with this approach in theory, but the accounting regulators, while espousing the notion in words, have done exactly the opposite. Just look at the number of EITF topics and FASB staff positions that are issued each year. Rather than letting auditors apply the principles, they continue to drill down into the accounting application with even more specificity and rules. Where are the principles if we need to have specific guidance such that the regulators create a rule for every accounting nuance that arises?
Principles-based accounting has been discussed for years, yet moves to create such an environment have not been successful to date. What makes the FASB think that teaming with the IASB will solve the problem? It is much more than just re-writing the rules – attitudes have to change. According to Financial Executives International President and CEO Colleen Cunningham, who was quoted in a recent article in CFO (09/06) Vol. 22, No. 10, P. 44 ; Stuart, Alix Nyberg], "In the current environment, CFOs are second-guessed by auditors, who are then third-guessed by the Public Company Accounting Oversight Board (PCAOB), and then fourth- and fifth-guessed by the SEC and the plaintiffs' bar." This kind of thinking does not foster the confidence and environment necessary for a principles-based approach.
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