The Financial Accounting Standards Board is consideringsignificant changes to ASC 840 (formerly known as FAS 13). Thesechanges would affect the way commercial real estate leases aretreated for accounting purposes by both lessors andlessees.
The International Accounting Standards Board has undertaken ajoint project with the FASB as part of their Memorandum ofUnderstanding (See note below) forconvergence projects. This joint project is intended to addresscriticism of accounting for operating leases.
Standards currently require off-balance sheet accounting andprovide users of the financial statements with inadequateinformation regarding the obligation of lessees. The two boards’project to revise applicable standards may lead to a completeoverhaul of lease accounting, eliminating the need to distinguishbetween operating and finance leases and resulting in all leasesbeing reflected on the balance sheets of both lessors and lessees.The exposure draft of the new standard is expected later thissummer, and FASB and IASB will seek comments from constituents.
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Howard Roth
As the Global Real Estate Leader, Howard coordinates the firm's activities across a broad array of related services around the world. EY has the largest integrated real estate practice of any Big Four firm, with more than 7,500 professionals around the world providing audit, tax, transaction and advisory services to owners, builders, lenders and users of real estate. EY serves more than 4,000 real estate clients throughout the world. Howard brings more than three decades of experience in the real estate industry. He has worked extensively with major real estate private equity funds, domestic and offshore real estate investment trusts and large public homebuilders, as well as numerous construction and hospitality companies. His credentials include a BA in Accounting from Hofstra University. He is a member of the American Institute of Certified Public Accountants and New York, New Jersey and Connecticut Society of CPAs, has been a columnist for several major industry publications and is frequently a speaker at key real estate industry events.
