There are a lot of potential accounting changes facing commercial real estate firms as U.S. and global authorities remake standards. There is, as Real Estate Roundtable's Jeff DeBoer recently pointed out at a Realshare conference, the matter of lease accounting, which depending on how the rules are redone, will have a dramatic impact on how leases are accounted for. There is the question of how long banks will be able to carry non-performing assets on their books.
Then there is the convergence of international standards, which will usher in an entirely new chapter of accounting regulations for real estate firms and REITs. For instance, in a video on NAREIT's home page, George Yungman, SVP of Financial Standards, notes that under International Financing Reporting Standards, REITs will have the choice of opting for fair value standards - as many international firms already do.
Getting to the point where developed and developing countries have reached a consensus - much less adoption - of one set of standards is clearly not easy. Assuming it is done correctly, the payoff could be significant for both firms and their shareholders. (One only has to look at the lessons learned from Lehman Bros.' global shuffling of $50 billion in assets to understand that). Hearing, then, about the potential of undue political pressure placed on the process can be maddening. I am not going to claim the U.S. is an innocent in such matters, but a news report from the Financial Times on Monday illustrates how far some officials are willing to go with this. According to the FT, European Union's new internal market commissioner has suggesting linking the future funding of the International Accounting Standards Board to whether it goes along with suggestions from the European Commission.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
