Grant Thornton Supports Lease Accounting Overhaul

If they do not already do so, analysts need to begin proactively adjusting their models to reflect the assets and liabilities underlying “operating” leases onto the books of the companies they follow.  It is no longer a question as to whether many current operating leases will go onto the books, its merely a question of when and how many!

As a former Assistant Chief Accountant in the SEC’s Division of Corporation Finance, I can attest to the fact that there is probably no area of the current accounting literature that is disliked more by the SEC’s accounting staff than lease accounting (i.e., SFAS 13 and related pronouncements).  Additionally, as a technical accounting consultant, I can further attest to the fact that companies in need of facilities and equipment routinely structure related transactions within a cat’s whisker of the bright-line triggers within the lease accounting rules to avoid on-balance sheet “capital” lease treatment.  As a result, most companies are able to ultimately characterize the vast majority of their leases as off-balance sheet “operating” leases, whereby they merely record periodic rent expense.  In short, with a tweet here and a tweet there, a company with savvy accounting advisors can avoid booking millions, if not billions, of assets and liabilities.