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Pay Attention to Lease Accounting

It's vital to keep track of major lease accounting changes.

A study indicates that 54 percent of global businesses are unprepared for a major change coming to accounting practices for global leasing transactions, because they don't even know it is happening.

Grant Thornton's International Business Report showed that a large group didn't know off-balance sheet leases could basically be eliminated when the International Accounting Standards Board and Financial Accounting Standards Board issues new rules on the subject. A larger majority of U.S. firms - 69 percent of American respondents - were tuned into the changes.

"The lack of transparency with regard to leases has festered for years, but a major change to lease accounting is a once-in-a-generation event and the IASB and FASB need to be patient to get things right," stated John Hepp, a partner in Grant Thornton LLP’s Accounting Principles Group.

The company said organizations will have to be on the lookout for announcements from IASB and FASB, and encouraged them to actively participate in the process to ensure the groups draft plans that are helpful for businesses. Hepp added that some of the current proposals suggest lease restructuring, but it's unclear if any changes would help transparency.

Businesses may also want to start getting involved in the debate over whether to adopt ISAB in the U.S., stay with the current system of reporting under the Generally Accepted Accounting Principles or create some hybrid version of the two.