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Lease Accounting Drafts Remain Controversial

There is still some debate on how to draft the new lease accounting rules.

The Financial Accounting Standards Board and International Accounting Standards Board's effort to create a new set of leasing standards. However, the latest draft has drawn a huge number of response

The Financial Accounting Standards Board and International Accounting Standards Board's effort to create a new set of leasing standards. However, the latest draft has drawn a huge number of response from the public, and not all of them are positive, according to CFO magazine.

Renewal periods seem to be one of the main point of focus, with the proposal suggesting lessees would have to add their lease terms and renewal periods to exposure drafts and balance sheets.

"There are a lot of subjective evaluations and a lot of nuances that will definitely affect companies' implementation," Mindy Berman, managing director at real-estate services firm Jones Lang Lasalle, told the news source.

The magazine also cited a study from Ernst & Young, which indicates that "renewal rates prices at a bargain, penalty payments for relocating, or significant installment costs expended" could serve as economic motivators.

The furor comes just two weeks after the FASB released a new proposal for updating accounting standards, which aims to create "consistent criteria for determining whether an entity is an investment company." The group said the guidelines would make it easier to compare organizations that qualify as investment companies under IFRs vs GAAP standards.  

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