Overseers of U.S. and international accounting standards say they have preliminarily settled on a unified approach to booking commercial lease expenses.
Norwalk’s Financial Accounting Standards Board, or FASB, and London’s International Accounting Standards Board (IASB) propose that some lease contracts be accounted for using an approach similar to that proposed in the 2010 leases Exposure Draft and some leases would be accounted for using an approach that results in a straight-line lease expense.
The panels say their proposal addresses widespread concern that many lease obligations currently are not recorded on the balance sheet and that the current accounting does not represent the economics of all lease transactions.
“On balance, we decided that leases that convey a relatively small percentage of the life or value of the leased asset should be recognized, evenly over the lease term,” FASB Chairman Leslie F. Seidman said in a statement
The boards say they previously agreed that leases should be recorded on the balance sheet, but have continued to discuss the classification and pattern of expenses in the income statement.
Both plan to release a joint draft detailing their proposal in the fourth quarter, with convergence set for 2013, officials say.
