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Should We Fuss About FASB?

Recently, there has been some gnashing of teeth about the possible impact on sale-leasebacks by a proposed change in the manner in which leases are accounted for under GAAP. FASB has put forward some changes which, if enacted, will effectively eliminate the distinction between operating and capital leases.

By Jonathan Hipp | Updated on June 30, 2010

Recently, there has been some gnashing of teeth about the possible impact on sale-leasebacks by a proposed change in the manner in which leases are accounted for under GAAP. FASB has put forward some changes which, if enacted, will effectively eliminate the distinction between operating and capital leases. For companies such as Walgreens and CVS, who heavily utilize sale-leasebacks, and typically structure the resulting leases as operating leases, this would means billions of dollars of lease liabilities would move from the footnotes to the balance sheet.

While it’s true that this change will be a headache for the accounting departments of both lessors and lesses (not the least of which due to its retroactive nature) it’s impact on overall sale-leaseback activity should be zero.

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