CEOs and CFOs are cautiously eyeing the limitations that convergence of FASB and IFRS standards may bring to lease accounting. Predictions are that a new global lease standard, anticipated in 2011, will require many traditionally classified operating leases into the capital lease status.
- What are the current FASB criteria for classifying leases as either operating or capital leases?
- What is the general concept that the FASB and IASB are considering as the way to distinguish between capital and operating leases?
- Explain how this new reclassification would cause “balance sheet blues” and companies that lease to “appear more highly leveraged?”
Johnson, S. (2009). “Balance-Sheet Blues,” CFO (Retrievable online at http://www.cfo.com/article.cfm/14457794/c_2984368/?f=archives)