Spring 2011 issue of Horizons

Survey Comments Revealing On Lease Accounting Rules

A majority of respondents have indicated that they do have the systems to track the new information, but it will still take a significant amount of time to gather the data and determine the necessary accounting adjustments.

In written survey comments, respondents expressed mixed reactions regarding the proposed lease accounting rules. Below are a few of the responses: “They require a substantial amount of work and do not result in better information than good notes would provide.” “This is a change which is long overdue. The gymnastics used to keep many leases off the books as operating leases has been, at best, a distortion of the true liabilities of many companies and, at worse, a material misstatement of the balance sheet.” “The lease payment costs should not be considered any differently than other operating costs. It is just an annual cost of business. The values on the balance sheet will not clarify the worth of the entity.” “While operationally tricky, it will record liabilities that have long existed and never been reflected on the face of the financials.” “I think the changes are ridiculous as they relate to operating leases where there is absolutely no intent for the leased object to change hands at the end of the lease. If it is material, I believe a footnote to the financial statements would be much better and could clearly state whether or not title was to be transferred.”

Do you have the IT systems available to track and account?

18%

33%

2%

47%

Yes

No

No Response

Yes - But It Will Take Time

Opinion is largely split in terms of whether the users of the financial statements will understand the proposed changes to lease accounting. Will users of financial statements understand changes in lease accounting?

31%

42%

2%

25%

Yes - After Explanation

No Yes

No Response

Raise Your Expectations

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