Accounting rule makers will be looking for ways to simplify plans to bring leases on to balance sheets when they meet in January to begin reviewing a wide diversity of feedback on a joint rule proposal.

Russ Golden, chairman of the Financial Accounting Standards Board, said at a national accounting conference FASB will meet in January with the International Accounting Standards Board to work through widely diverse feedback on their proposal to develop a new standard for lease accounting. The boards' proposal would distinguish between equipment and property leases in a way that many say is too complicated. The boards will examine at the same time whether they should, as suggested in some comments and feedback, abandon the entire lessor side of lease accounting and focus just on changes for lessees. “It will be discussed in January and in March,” he said. "We will try to work through and have a converged solution."

Feedback on the boards' joint proposal to overhaul lease accounting has ranged from broad support to suggestions the boards should scrap the project and instead develop new disclosure requirements. Users of financial statements generally told FASB and IASB they support putting leased asset and the related liabilities on the balance sheet and believe there are economic differences between real estate and property leases that should be reflected. FASB's own Investor Advisory Group, however, suggested FASB should go back to the drawing board and focus on a way to simply draw out new disclosures on lease obligations.

From preparers, the boards heard many who support the recognition of assets and liabilities, but believe the cost that would be associated with implementing the proposed standard would outweigh its benefit. They are concerned about complexity, about separating lease and non-ease components, and about the provisions for lessors.

FASB Technical Director Sue Cosper said at the conference the boards will be looking for a way to simplify the existing proposal. “When we start the re-deliberations, we plan is to hit the core of the proposal head on,” she said. The boards will reconsider the lessor model and look for ways to simplify the lessee model, she said. Simplifications could involve provisions around the short-term lease exception, what constitutes a core vs. a non-core leased asset, and other ideas. “I suspect it may take a few meetings before we are able to come to consensus on some of those issues,” she said.

Whether the boards decide to issue another exposure draft depends on the nature of the changes the boards consider, said Cosper. “If we pull back some on what was exposed based on the feedback, there's really no need to re-expose,” she said. “This was a second exposure draft. I'm not sure there are a whole lot of brand new alternatives we can consider at this point.”