Do you think the change in lessor accounting was to fix an “oversight” in the standard? Or, was the FASB bowing to pressure?
Do you think that changes in the lease accounting standards will affect a firm’s leasing policy? Can you think of situations where accounting standards have affected firms’ decisions?
So, Walgreens and others collectively will add a few trillion in liabilities to their balance sheets for operating leases, beginning in 2019. What do you anticipate as market reactions to the changes, if any?
Operating leases are coming on-balance-sheet next year, so rating agencies will not have to estimate the liabilities for credit rating purposes. What are possible consequences if their estimates are or have been right or even close? Far off?
The IASB has passed a new rule that will require most leases to be capitalized. If investors are “reasonable” and if markets are efficient, who cares where the lease information appears? In your opinion, does the new rule call into question these assumed attributes of investors and markets?
How would you develop a decision rule about whether to do a sale-leaseback? Would you use a time-value component? If so, how would you choose the discount rate?
How would you respond to the statement that bringing the leases on balance sheet with the new accounting standards would be a “hit to . . . bottom line profits”?
How many times have you heard that the sky will fall if leases are moved from the notes to the balance sheet?
Which lease accounting model do you think is “better”: the IASB’s or the FASB’s? Will it matter if the IASB and FASB do not agree and go in separate directions?
The lease accounting saga continues with no agreement in sight. If you were on the FASB or the IASB, whom would you consider the main constituency for any new rules? Shareholders, analysts? Others? How would this constituency affect your standard setting decisions? What does the analyst community want (according to the article)?
Describe some of the ripple effects of changing lease accounting (where operating leases would be capitalized). Should the standard setters take any of these effects into consideration when debating the new lease standards? Why or why not?
The IASB and FASB have been working on new lease accounting rules since 2006. Why do you think that it is taking so long to change the accounting for leases? Do you believe the new rules would be an improvement in lease accounting? Why or why not? Does it matter if most leases are off-balance sheet under current accounting rules? Why or why not?
If the proposed lease accounting standard is unpopular, why do you think the FASB and the IASB are proceeding with it anyway? What are the possible ramifications, if any, of such a split vote (4-3) at the FASB on the new proposed standard?
Why do you think it is a “battle” to try to bring leases on-balance-sheet? Why does it matter if the information about lease contracts is in the notes or on the balance sheet? To whom, besides standard setters, does it (or should it) matter?
Why do some analysts want the current lease accounting rules to remain unchanged? Should the FASB and IASB listen to these user groups and abandon the effort to bring leases on-balance-sheet?
How or why does it matter, if it does at all, that capital leases result in front-loading expenses for lessees? Explain how the front-loading occurs.
Operating leases are already disclosed in the notes. So, how will capitalizing leases affect a firm’s credit rating when the credit rating agencies already consider operating leases in their credit ratings?
