After making a number of substantial changes to their proposals for new lease accounting rules, the Financial Accounting Standards Board and the International Accounting Standards Board will republish their newest ideas and call for a new round of comments before finalizing the standards.

The boards are holding firm on their basic principle that all leases will appear on corporate balance sheets, but have made a number of changes to their original proposals, published in August 2010, based on the first round of comments and redeliberation. “While we still have other matters to discuss, stakeholders would appreciate the opportunity to comment on the revised package of conclusions,” said FASB Chairman Leslie Seidman in a statement.

FASB and IASB said they will endeavor to wrap up their current deliberations during the third quarter and publish a revised exposure draft of the new standards “shortly afterwards.” The boards initially targeted June 2011 to finalize the leasing standard along with new rules for revenue recognition and financial instruments as the backbone of their effort to eliminate major differences between U.S. and international rules. Then they pushed the expected completion date to the end of 2011 for those core convergence projects. With the plan to re-expose the lease standard – and an earlier decision to re-expose the revenue recognition proposal as well – the boards have not provided an expected time line to finalize the new rules.

While the initial proposal called for a single model that would treat all leases like the financed purchase of an asset, the two boards considered allowing a more straight-line treatment for leases that in substance are more like rental agreements. Ultimately, they abandoned the idea because it proved to be problematic in a number of different ways. As they have sifted through comment letters and rethought their original proposals, the boards have come to some new conclusions about how to treat uncertainties in lease contracts, like contingent rents and renewal options.

In a published remark, PwC applauded the boards' decision to re-expose the standard, calling it “the best way for the boards to obtain the right level of input.” John Hepp, a partner with Grant Thornton, says the standard is important enough and the directional changes significant enough that it deserves a new round of deliberation before becoming final. “Leasing is part of the central nervous system of corporate finance,” he says. “This is not just a new accounting standard. It's a new theory of accounting.”