STAMFORD, CT-The commercial real estate industry isawaiting--with much trepidation--the forthcoming new draft rulesfrom the Financial Accounting Standards Board on lease accounting.A seemingly arcane bit of accounting, these rules will, in fact,have a major impact on how tenants and landlords account for leaseson their balance sheets.
What the industry already knows about the forthcoming draftsuggests the change will not be pretty: there are two changescompanies have to worry about. One, all lease obligations are goingon the balance sheet--all rent obligations, in other words, will becapitalized as a form of debt financing.
The second is that the occupancy expense that runs through theP&L will increase substantially, but companies will no longerbe able to recognize rent expense. Instead, it will be anamortization of an asset they have.
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