The Financial Accounting Standards Board (FASB) is to release its new leases accounting standards update on 25 February as part of a major overhaul which will see lessees required to present right-of-use assets and lease liabilities on the balance sheet.
The new guidance will be effective for public business entities for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years/
Non-public business entities should apply the new guidance for fiscal years beginning after 15 December 2019.
The International Accounting Standards Board (IASB) published the international version of the standard, IFRS 16 Leases, which is effective for annual reporting periods beginning on or after January 1, 2019 on 13 January 2016.
Bloomberg is reporting that a group of business organizations, including the US Chamber of Commerce and Financial Executives International, has written to FASB over concerns that application of the lease accounting standard would be harmful for private companies.
“We are concerned that the decision to apply the soon-to-be finalized lease accounting standard to private businesses will exacerbate complexity, not meet the needs of private company investors and harm capital formation for those businesses,” the letter states.
Though the standard will include some accommodations for private companies, the letter claims these have not gone far enough.
“Such a decision would wrongly presume that users of private company financial statements would prefer capitalizing leases on balance sheet,” the letter states. “However, since users of private companies are different than public company financial statement users, in both composition and motivation, this may not be the case.”