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The FASB and IASB issued the second Exposure Draft (“ED”) of the proposed new leasing rules on May 16, 2013 with a deadline for comments of Sept. 13, 2013. The ED is an improvement over the 2010 ED in that it is closer to current GAAP in areas such as the definition of the lease term and lease payments. The major impacts of the ED versus current GAAP to lessees will be: capitalizing all but short-term operating leases as an asset and liability, debt covenants may have to be revised if the new capitalized operating lease liabilities are considered debt, most equipment leases will have front-loaded P&L lease costs, and sale leasebacks with purchase options will not be accounted for as sales and leasebacks. The major impacts of the ED versus current GAAP for lessors will be: a portion of upfront sales-type lease profits will be deferred, leveraged lease accounting will be eliminated, tax credits and grants will not be reported as revenue, and most residual guarantees/insurance will not be considered financial assets. The plan is to issue a new lease accounting rule in 2014 after review of comment letters to the ED and re-deliberating identified issues. The effective date when all lessors and lessees implement the rules is likely to be in 2017, although lessees and lessors will have to show comparative results for 2015 and 2016 in their 2017 financial statements. The work to transition existing leases to the new rules will be a big undertaking, more for so lessees, but also problematic for lessors.
The ED has several controversial issues and should attract a high volume of comment letters. I believe the Boards will make some changes to the proposal to improve its effectiveness in providing useful information to readers of financial statements.
A chart offering an analysis of the key elements of the proposal and the likely outcome can be found here.
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Bill Bosco, a member of this newsletter's Board of Editors, is president of Leasing 101. He may be contacted by phone at 914-522-3233 or via e-mail at [email protected]. Website: www.leasing-101.com.
The FASB and IASB issued the second Exposure Draft (“ED”) of the proposed new leasing rules on May 16, 2013 with a deadline for comments of Sept. 13, 2013. The ED is an improvement over the 2010 ED in that it is closer to current GAAP in areas such as the definition of the lease term and lease payments. The major impacts of the ED versus current GAAP to lessees will be: capitalizing all but short-term operating leases as an asset and liability, debt covenants may have to be revised if the new capitalized operating lease liabilities are considered debt, most equipment leases will have front-loaded P&L lease costs, and sale leasebacks with purchase options will not be accounted for as sales and leasebacks. The major impacts of the ED versus current GAAP for lessors will be: a portion of upfront sales-type lease profits will be deferred, leveraged lease accounting will be eliminated, tax credits and grants will not be reported as revenue, and most residual guarantees/insurance will not be considered financial assets. The plan is to issue a new lease accounting rule in 2014 after review of comment letters to the ED and re-deliberating identified issues. The effective date when all lessors and lessees implement the rules is likely to be in 2017, although lessees and lessors will have to show comparative results for 2015 and 2016 in their 2017 financial statements. The work to transition existing leases to the new rules will be a big undertaking, more for so lessees, but also problematic for lessors.
The ED has several controversial issues and should attract a high volume of comment letters. I believe the Boards will make some changes to the proposal to improve its effectiveness in providing useful information to readers of financial statements.
A chart offering an analysis of the key elements of the proposal and the likely outcome can be found here.
'
Bill Bosco, a member of this newsletter's Board of Editors, is president of Leasing 101. He may be contacted by phone at 914-522-3233 or via e-mail at [email protected]. Website: www.leasing-101.com.
During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.
What Law Firms Need to Know Before Trusting AI Systems with Confidential Information In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.
GenAI's ability to produce highly sophisticated and convincing content at a fraction of the previous cost has raised fears that it could amplify misinformation. The dissemination of fake audio, images and text could reshape how voters perceive candidates and parties. Businesses, too, face challenges in managing their reputations and navigating this new terrain of manipulated content.
The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.
As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.