Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
FASB to Change Leveraged Lease Accounting Rules: LILO Settlements to Trigger Rerunning the Earnings
The Financial Accounting Standards Board met on Nov. 17, 2005 on the subject of the accounting impact of IRS settlements of Lease-In-Lease-Out (“LILO”) and Lease-To-Service Contracts (aka “SILO”). To the surprise of the leasing industry, the FASB reached tentative conclusions that a change in the timing of cash flows requires a recalculation of the leveraged lease earnings and the lease classification should be re-examined. The recalculation of earnings results in a large, negative catch up adjustment and a positive adjustment to future earnings, but spread over the life of the lease. The lease classification issue should not be a problem.
Background
LILO transactions were struck down by the IRS in 1999 and several, but not all, lessors have settled. To my knowledge none have rerun the leveraged lease earnings on the basis of FAS 13 paragraph 46, which states “if the revision of another important assumption changes the estimated total net income from the lease, the rate of return and the allocation of income to positive investment years shall be recalculated from the inception of the lease.” In the case of LILO settlements, the timing of deductions/taxable changes but the after tax net income does not change. In 1999 the FASB staff was asked to answer a technical inquiry on rerunning settled LILOs when only the timing of cash flows changed, and they ruled that the language of paragraph 46 should be followed. Lessors and the Big 4 have followed this guidance. This is now being reconsidered as the American Jobs Creation Act of 2004 ruled that LILO/SILO type leases where the lessee is tax exempt cannot create shelter for the lessor. This will cause a great number of large ticket leases to come under scrutiny by the IRS, with a high probability of significant changes to the pattern of deductions. The issue is now a very large one.
Yachts, Jets, Horses & Hooch: Specialized Commercial Leasing Models
Defining commercial real estate asset class is essentially a property explaining how it identifies — not necessarily what its original intention was or what others think it ought to be. This article discusses, from a general issue-spot and contextual analysis perspective, how lawyers ought to think about specialized leasing formats and the regulatory backdrops that may inform what the documentation needs to contain for compliance purposes.
Hyperlinked Documents: The Latest e-Discovery Challenge
As courts and discovery experts debate whether hyperlinked content should be treated the same as traditional attachments, legal practitioners are grappling with the technical and legal complexities of collecting, analyzing and reviewing these documents in real-world cases.
Identifying Your Practice's Differentiator
How to Convey Your Merits In a Way That Earns Trust, Clients and Distinctions Just as no two individuals have the exact same face, no two lawyers practice in their respective fields or serve clients in the exact same way. Think of this as a "Unique Value Proposition." Internal consideration about what you uniquely bring to your clients, colleagues, firm and industry can provide untold benefits for your law practice.
Risks and Ad Fraud Protection In Digital Advertising
The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.
Turning Business Development Plans Into Reality
This article offers practical insights and best practices to navigate the path from roadmap to rainmaking, ensuring your business development efforts are not just sporadic bursts of activity, but an integrated part of your daily success.