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.

The FASB wants all assets and liabilities arising from lease contracts to show up on balance sheets.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.