WASHINGTON, DC—A key concern for industryfirms is the looming changes to how they account for leases. TheInternational Accounting Standards Board and the US FinancialStandards Board have worked—or rather, struggled—to converge theirtwo respective lease accounting standards, and so far the proposalshave been less than pleasing to the industry.

Now, a new proposal has emerged that could be satisfactory toreal estate and other business users, Bill Bosco, a consultant forthe Washington, DC-based Equipment Leasing and Finance Associationand principal of Leasing 101, tells Real Estate Forum. There arestill some hurdles, namely that IASB is reportedly not yet onboard, he says. "But this is the proposal we think most of thestakeholders would agree is an acceptable method," he states."Certainly real estate owners, concerned about what their leasecosts will look like, will accept this one as the best of allproposed methods." He estimates that real estate leases comprise75% to 80% of the dollar volume of operating leases.

This new proposal is called whole contract. It accrues theaverage rent as the reported lease cost—much the same as currentGAAP—and adjusts the lease liability on each balance sheet date tobe the present value of the remaining lease payments. "It does notchange the P&L or the cash flow presentation for what used tobe the operating lease," Bosco says.