IASB + FASB convergence Q


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Hello,

In respect to the convergence that's been going on since 2002 between FASB and IASB attempting to implement IFRS over U.S. GAAP:

1.) What's going to happen to the current definition of operating leases? Are they simply just going to "go away" and force current company's to list them on the balance sheet as a liability since the four criteria won't be there anymore?

2.) What's the primary resistance that the convergence is facing? Is it more nationalism or is it something else entirely?
 
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bklynboy

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My understanding is that all leases will be part of the balance sheet to reflect the economics behind these transactions. There is an exception for leases less than 12 months however.

In general the concept of putting these on the balance sheet makes a lot of sense since these are right now off balance sheet and the obligation companies have is not properly shown or known without digging through the footnotes.

I think the biggest challenge is the effort needed by companies to compile the data as system and process changes will be needed to properly identify all these leases and track the appropriate amounts.
 
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Counterofbeans

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This is a hot button for me... :)

I may be in the minority, but I don't see IFRS getting a lot of traction at the moment, DESPITE what we often hear to the contrary...

In theory, it's a WONDFERUL concept, but, as usual, stupid politics get in the way, as well as other, significant, problems

I hold to two issues:

(1) Many/most of the companies in the U.S. don't seem to have a high incentive to convert. This looks like just another government mandated change with a lot of cost and zero benefit. This is primarily for the betterment of the "investors, " not us, so the response is often negative. Why is it that I think back to the pain of Sarbanes-Oxley when I hear about this?!?!

and

(2) the aforementioned political issue--they are a MESS. It's such a joke how so much of this is just political nonsense...

I read a very interesting article on it a while back and it brought up some interesting points (doing my best to recall/summarize it)...

--I don't think the IASB did itself any favors with their absurd decisions in 2007 (regarding SFAS 34 (Capitalization of Interest Cost)), as well as a few from 2011. They (IFRS members) clearly showed that they cannot be trusted to tell the truth or put investors' priorities first.

--In 2002, the European Commission mandated IFRS for all listed companies in the EU. But the reason for this was because the members of the EU feared losing their own power (this is related to that Daimler-Benz issue/debacle back in the mid-90s), NOT because it had anything to do with the greater good. Basically, they fear that the US could end up with too much influence on the IASB. Those governments and large banks don't want to give up their power (can you say, POLITICS?!?!). This discussion doesn't take place if all of the EU wasn't IFRS right now. You just have to ask yourself, "Why are we considering this again?!?!"

--Just imagine the mess it would be if a foreign company files a questionable interpretation of IFRS (& is blessed by their auditors) and an SEC registrant, faced with similar facts and circumstances, has to comply with a stricter definition of IFRS? Ugh--that's a mess I can't even contemplate...

--I'm not sure that Congress, via the SEC, will want to give up it's own power to set accounting rules. This was the very first thing I thought of when I heard about a potential change to IFRS & I just don't see that happening

We shall see, but I'll bet anyone a Starbucks coffee this isn't implemented by 2020... hell, barring some SERIOUS changes, I don't see this implementation doing anything in its present form/current political climate
 
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