Counting Leases Before They Hatch

By: Tom Muller
– CIRE Magazine
A proposed accounting change will dramatically affect how landlords and tenants treat leases.

The accounting profession is currently evaluating a proposed new standard that promises to fundamentally change the ways landlords and tenants account for — and negotiate — leases.
Under review is a proposed rewriting of the Financial Standards Accounting Board’s Accounting Standards Codification Topic 840, which before 2009 was known as FAS 13. This topic, "Accounting for Leases," is one of many standards that together comprise generally accepted accounting principles, or GAAP, in the United States.
The draft standard has drawn much heated debate for its potential to fundamentally change the leasing market, likely shortening lease terms and dramatically reducing the apparent value of properties with traditionally long lease terms, such as office buildings.

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