From the December-January 2011 issue of Treasury & Risk magazine

Leases on the Books?

Half a trillion dollars. That's how much Goldman Sachs analysts claim could be added to corporate balance sheets if a proposed change in lease accounting is approved by the Financial Accounting Standards Board. The proposal involves the accounting for some $640 billion worth of leases at companies worldwide, but it has received surprisingly little attention considering its likely impact, both on companies that lease substantial amounts of equipment and on equipment leasing firms. The International Accounting Standards Board is considering a similar change.

Currently, most leases are classified as operating leases and do not show up on balance sheets. For example, airlines don't record leased aircraft as assets on their balance sheets, and oil companies don't include leased oil rigs. Nor do companies list lease payment obligations as liabilities. They provide data on leases in footnotes to the balance sheet.


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