Equipment leasing and all things related

The hottest topic in US lease accounting these days is, of course, the changes that are expected to be made to FAS 13.  I also answer a lot of questions regarding convergence with the international lease accounting standards, whether in the US or elsewhere around the world.  Since I am constantly dealing with, and understand, lease accounting standards from around the world, the convergence of FAS 13 with the international standard has never really been a concern for me because I know that most standards fundamentally are the same as FAS 13.  I found out that this view is a bit blind, however, in the last several weeks, culminating in the most recent ELFA Advanced Leasing Principles class I have been teaching this week.

You can see, then, that it is not convergence alone that will result in the demise of off balance sheet financing here in the US.  Instead, it will be due to changes in the fundamental approach to accounting for leases, not only here in the US, but on an international basis.

Will FAS 13 change in the near future?  I don’t think anyone has any doubts about that happening.  This change, however, will not be the result of converging with IAS 17.  The current project underway is to change both FAS 13 and IAS 17 so that the resulting standards are in harmony (converged) with each other.  Only a small comfort, if at all, but this means that not only the US, but all of Europe, at a minimum, is going to get a new lease accounting standard.  It remains to be seen how far the changes go, and whether the theorists will be tempered by the commercial realities of leases and how they will be recorded.  Good luck on that one!