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Final Lease Accounting Rules Coming Soon

Two accounting standards agencies have said they will vote on rules regarding

Members of the International Accounting Standards Board and the Financial Accounting Standards Board recently indicated their organizations would be ready to finalize lease accounting rules sometime in June, according to a Wall Street Journal report.

The agencies will vote on a new set of guidelines in June, which could result in a final written draft by the end of the year, the Journal reported. The new guidelines are expected to add roughly $2 trillion in lease obligations to corporate balance sheets. The impact would be felt most among retail stores and chains that lease the bulk of their business properties. Those companies would see a major increase in long-term debt, according to an analysis from the Rochester Business Journal.

“I think we’re stuck with at least considering seriously two different lease models,” FASB member Thomas Linsmeier said at a recent meeting of the agencies, according to the WSJ.

One model would have companies report a majority of the costs during the early years of a lease and classify the expense as a "new right of use property." The other model would largely follow current guidelines in allowing companies to expense their rent payments, the WSJ reported.