According to a special report provided by Bill Bosco, leasing industry expert and regular Monitor contributor, the Boards remain at odds on the key issue of how lessees should account for all leases once leases are recognized on balance sheet.

The debate is over using one method (capital lease Type A accounting) to account for all leases or using two methods, which would retain current GAAP’s distinction between capital and operating leases for expense purposes. Under this approach, the former operating leases would retain straight line rent expense.

The Boards are also at odds as to whether to extend exemptions for small leases and leases of non-specialized assets, and they differ on the approach to lessor accounting, but are much closer on that topic (and are closer to a converged answer) than they are on lessee accounting. They will continue to work towards a conclusion of the project, but it appears they may have important differences.

We may see two standards issued that are converged for day 1 lessee accounting – that is that all leases are capitalized – but not converged on subsequent accounting for lessees and the exemptions for certain small non-specialized asset leases. The next step will be to meet again but no date was set for that meeting.

To read the full report click here.