In an update on the lease accounting project, Bill Bosco says the boards should acknowledge that the real objective is to capitalize operating leases, not to make wholesale changes, as what is in place seems to work well. Bosco also shares an unsolicited letter he sent to the chairs of the FASB and IASB offering his suggestions on moving the project forward.

To read Bosco’s letter to the IASB and FASB chairs click here.

Bosco adds, “My opinion is that they should first acknowledge that the real objective is to capitalize operating leases not to make wholesale changes where what is in place works well. Then they should work on lease classification as it impacts both lessee P&L and lessor accounting models. Then they should edit in their changes to definitions of lease payments, changes in variables payments and possibly sales type accounting. Finally they should make sure that the lessee accounting is so simple that small ticket leases are not an issue (basically that means adopting our ‘display’ executory contract accounting method and limiting reassessments).”

He predicts, “The FASB will be very agreeable and flexible on the issues that dominate the comment letters and that the ELFA has been pressing for, while the IASB may resist. BUT, I hope Hans Hoogervorst will assert himself to force practicality and a quick resolution along the lines the FASB favors.”