Legislative Bulletin - July 17, 2009

TRALA Comments on Proposed Lease Accounting Changes

TRALA submitted comments today to the Financial Accounting Standards Board (FASB) arguing against a one-size-fits-all approach to accounting for leases utilized in the truck leasing industry. TRALA also suggested that new complex reporting and capitalization requirements should be limited to material leases with equipment costs of more than $250,000 and lease terms of longer than 60 months. TRALA made these suggestions in response to a proposal issued by the FASB and the International Accounting Standards Board (IASB) as part of the joint [project to significantly overhaul lease accounting rules for the first time in 30 years.

The FASB/IASB lease accounting project stems from a June 2005 Securities and Exchange Commission report identifying the need to increase the clarity and accuracy of financial reporting of lease transactions. TRALA supports the FASB/IASB goal of improving the transparency of financial reporting. However, TRALA strongly believes that lease accounting should reflect the economic reality of lease transactions. TRALA also believes that small and medium sized businesses that lease vehicles should not saddled with additional costs and administrative burdens resulting from complex reporting and capitalization requirements that do not increase the clarity or accuracy of their financial disclosures.

Following the announcement of the FASB/IASB project, TRALA hosted senior staff from the FASB at its 2006 Board of Directors meeting to exchange ideas on the project’s scope and goals. Subsequently, through its FASB Working Group, TRALA submitted an informational letter to the FASB outlining the various types of lease structures and lease terms used in the truck leasing industry. TRALA is also working cooperatively with an international coalition of trade organizations representing the broader leasing industry to encourage the development of workable and effective lease accounting standards. Final standards for lease accounting are expected to be adopted sometime in 2011.

To see TRALA’s full comment letter submitted to the FASB, please click here. The FASB/IASB proposal, released on March 19, 2009 as a Discussion Paper titled Leases: Preliminary Views, is posted on TRALA’s website and can be accessed by clicking here. For more information on the TRALA’s efforts regarding the proposed changes in lease accounting, please contact TRALA’s Tom James at 703-299-9120 or at tjames@trala.org.