Time passes

17 May 2013 By Edward Hadas Follow @edwardhadas

They’ll add almost all these financial transactions to balance sheets next year. Eliminating an obvious economic fiction is welcome, even if it took almost a decade to do it. The long delay is a reminder of accounting’s complexity – and difficult politics.

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On May 16, the International Accounting Standards Board and the Financial Accounting Standards Board published for public comment a revised draft of proposed changes to the accounting for leases.
The two groups published a snapshot of the 349-page draft stating “the 2013 World Leasing Yearbook reported that new leases entered into worldwide in 2011 amounted to almost $800 billion. Under existing accounting standards, the majority of those leases are not reported on a lessee’s balance sheet. For many entities, the off-balance-sheet financing numbers can be substantial. In 2005, the U.S. Securities and Exchange Commission estimated that U.S. public companies may have approximately $1.25 trillion of off-balance-sheet undiscounted operating lease commitments”.

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