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Accurate Accounting.  It's Not Optional... It's ESSENTIAL!

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Proposed Lease Accounting Change

For anyone not aware of where the way business financial statements are structured comes from, as it stands now, there are two entities responsible for determining all the particulars: in the U.S., the Financial Accounting Standards Board (FASB); overseas, the International Accounting Standards Board (IASB).  Over the past few years, the two entities have tried to converge their accounting standards, making accounting more uniform throughout the world.  These efforts have met with repeated delays and snags, but according to an article on WSJ.com by Michael Rapoport posted on 05/16/2013: Accounting Change Could Boost Companies Debt, the entities have prepared two new proposals that, with few exceptions, are virtually identical: requiring any lease with a term of longer than 12 months to be carried as debt on the Balance Sheet as opposed to the current practice of documenting them in a note to the financial statements.  Frankly, this is one change I agree with, seeing that a lease, once signed and agreed to, is an obligation that must be repaid, just as a loan is; why should leases be reported differently than loans?  If enacted, this change will increase debt and lower equity on the Balance Shet; however, in my opinion, that is a much more accurate depiction of the actual state of affairs with companies’ fnancial operations than the current method.  The proposed changes are open for comment until 09/13/2013, with the new rule to be written by 2014 and take effect in 2017.