Executive Summary iLease Management LLC (“iLease”) has been providing insightful research and recommended approaches into the proposed lease accounting changes for over two years. We do provide a brief overview and update of the proposed lease accounting changes in this document but this whitepaper is different than others that we have authored, as we explain not only how the proposed lease accounting changes will impact organizations but present, at the functional level, what questions need to be considered in order to comply with these upcoming standard changes. We dive into functional areas like Corporate, Finance, Treasury, Human Resource and Technology. And given the resource limitations within most organizations, we show how the lease accounting changes will present “Opportunities to Add Value” for Certified Public Accountants (“CPAs”) that are looking for ways to add value to their client relationships. We also suggest how CPAs can position themselves to be proactive and provide technology and advisory services that are of critical importance to their clients.
Introduction Lease accounting, particularly as it relates to lessee accounting, will change significantly under current proposals put forth in a Joint Project between the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”). There are a number of issues addressed in the Joint Project but the major point of contention concerns current standards for operating lease accounting. The fact that a lessee under current generally accepted accounting principles (“GAAP”) can execute a contract to make legally binding payments over a period of time, structure the contract so that it is classified as an operating lease and not be required to reflect that obligation as a liability on the balance sheet has been a source of controversy for both financial regulators and analysts. The FASB and the IASB began to tackle this issue in 2009 by issuing a Preliminary Views topic paper which was followed by Exposure Draft in August 2010 (‘the 2010 ED”) which proposed major changes to manner in which leases are accounted for. The 2010 ED sparked numerous comments and a lively debate among financial statement preparers because of the perceived additional complexity that the proposed changes would entail. The FASB and the IASB (“the Boards”) undertook significant A Call To Action for CPAs – Confronting the Lease Accounting Changes May 2014 ©2012 iLease Management LLC
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