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FASB Votes to Revamp Lease Accounting But new rules won't be ready until 2009.

Marie Leone, CFO.com | US
July 19, 2006

Lease Accounting: Much ado about nothing?: While the proposed requirement to capitalize virtually all leases is certainly a good one, is it really worth all the attention it is getting? Any analyst, creditor, or informed investor can easily use the footnote disclosures already required to put operating leases on the on the balance sheet as assets and debt, and adjust the debt/equity, ROA, and current ratios accordingly.

The only ones being harmed by the current rule are those creditors who are too naive (or lazy) to adjust loan covenant language to require the capitalization of operating leases before calculating the covenant tests.

Also, for those resisting capitalization, remember that capital leases produce a higher cash flow from operations compared to the same lease treated as an operating one.

Thank you.; Posted by Brent Bertrand | Jul 20, 2006 7:41 AM ET