On Sept. 10, 2012, NAR and a coalition of business organizations wrote to the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), urging them to fundamentally rethink their lease accounting project. Among other things, the letter raised serious concerns about the objective of the lease accounting project and whether investors will receive any additional decision-useful information under the new proposed standard.
Under the boards’ most recent lease proposal, businesses would be required to capitalize over $1.1 trillion in leased real estate assets onto their balance sheets. For businesses leasing space, especially small businesses, this will change these leases into a major liability.
Among other things, this proposal may jeopardize income property fundamentals, loan structures, property valuations, financing covenants, and the underlying economics of commercial real estate.