Proposed major lease accounting changes must be addressed at the portfolio level
As discussed in a previous posting, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are considering major changes to the financial accounting standards for leases (FAS 13). Under the proposed changes, all operating leases would be reclassified as capital leases and, as such, be accounted for on the organization’s balance sheet. This reclassification would also change the way that leases are accounted for on the income statement. Rent payments would no longer be included in EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). Instead, a before tax depreciation and interest amount would be calculated to account for the annualized use of the property.
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