Summary: New Accounting Rules Ruffle the Leasing Market
Recently, the Financial Accounting Standards Board has been working with the International Accounting Standards Board to merge GAAP’s creating a balanced method for all accountants. New standards have created consequences within the commercial real estate market. Within the next couple of years, the new standard will be completed and enacted officially sometime in 2013. This new standard will require companies to book leases as assets and liabilities on their balance sheets. Due to companies listing many leases as footnotes in their financial statements, public companies will have to put some $1.3 trillion in leases on their balance sheet s. In addition, because many private companies also follow GAAP accounting, the number could be closer to $2 trillion as analyzed by the Securities and Exchange Commission. This new standard could have many downfalls, including weakening companies in the eyes of investors and affecting credit ratings.
Connection
The connection between the article and the chapter is the different business activities, and the development of accounting standards. The effects of this new standard significantly changes the way businesses are able to be run. Businesses that are being operated right now will have to make certain changes to accommodate this change. In addition, with the development of new standards, restrictions are applied which stresses the way businesses organize their finances. Financial statements will now have to include leases as assets and liabilities on the balance sheet. This may change how businesses finance their company, invest and receive investments, and the business operation.
Reflection
In reflection to my knowledge and what I have read in the article I’ve grown to learn that GAAP’s are constantly changing. The fuse between the FASB and the IASB have created new GAAP’s to form which change the way businesses were run before and now in present day. The leasing market specifically will change completely in 2013 which will impact present day business owners and may change the thoughts of individuals thinking of owning a business. In addition, not only will this new standard affect business owners but it may affect consumers as a whole. Because the leases are recorded in a new manner causing certain businesses to lose money, prices may sky rocket to compensate for money loss. The future seems to be aiming at a harder life style, with new taxes such as the HST and new standards, business will have its great downfall throughout time and hopefully will be made up for in the far distant years.
Recently, the Financial Accounting Standards Board has been working with the International Accounting Standards Board to merge GAAP’s creating a balanced method for all accountants. New standards have created consequences within the commercial real estate market. Within the next couple of years, the new standard will be completed and enacted officially sometime in 2013. This new standard will require companies to book leases as assets and liabilities on their balance sheets. Due to companies listing many leases as footnotes in their financial statements, public companies will have to put some $1.3 trillion in leases on their balance sheet s. In addition, because many private companies also follow GAAP accounting, the number could be closer to $2 trillion as analyzed by the Securities and Exchange Commission. This new standard could have many downfalls, including weakening companies in the eyes of investors and affecting credit ratings.
Connection
The connection between the article and the chapter is the different business activities, and the development of accounting standards. The effects of this new standard significantly changes the way businesses are able to be run. Businesses that are being operated right now will have to make certain changes to accommodate this change. In addition, with the development of new standards, restrictions are applied which stresses the way businesses organize their finances. Financial statements will now have to include leases as assets and liabilities on the balance sheet. This may change how businesses finance their company, invest and receive investments, and the business operation.
Reflection
In reflection to my knowledge and what I have read in the article I’ve grown to learn that GAAP’s are constantly changing. The fuse between the FASB and the IASB have created new GAAP’s to form which change the way businesses were run before and now in present day. The leasing market specifically will change completely in 2013 which will impact present day business owners and may change the thoughts of individuals thinking of owning a business. In addition, not only will this new standard affect business owners but it may affect consumers as a whole. Because the leases are recorded in a new manner causing certain businesses to lose money, prices may sky rocket to compensate for money loss. The future seems to be aiming at a harder life style, with new taxes such as the HST and new standards, business will have its great downfall throughout time and hopefully will be made up for in the far distant years.
