In a victory for apartment owners, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on October 21 announced they would exclude commercial property owners, including apartment firms, from controversial proposed changes to lease accounting rules.
The now-jettisoned proposal would have required apartment firms to account for all of the income for leases lasting longer than 12 months on their balance sheets at the time of execution. Because the proposal included leases with optional renewal periods, a large number of apartment leases would have been covered. If effectuated as originally proposed, apartment owners would have had to modify their lease management tracking procedures and data management to facilitate the new accounting treatment. Second, firms would have had to decide whether to use two different standards--one for leases under a year and one for longer-term leases.
The new FASB/IASB rules were supposed to be finalized in June 2011; however, most observers now believe they will not be enacted until 2015 at the earliest. A final draft version is expected in the first quarter of 2012.