September 23, 2018

Lease Accounting Survey Highlights Growing Demand for Competent Survey Writers

Thank you, readers, for forwarding your spam to us.

The best way to complete the survey is to click the delete button located near the top of your Outlook window. But don't worry. A less optimal method of completing this poorly crafted survey also exists. (Let me be clear: this survey "powered by surveymonkey" is insulting to monkeys. Monkeys throw better crafted turds.)
First we need some context. IFRS convergence (or condorsement or endoption or advergence) brought lease reform to the attention of FASB. Then in July, the SEC's Mary Shapiro told IASB's Hans Hoogervorst that things were going too fast. She didn't break up with him, but she didn't want to move in with him, either.
Regardless, FASB got a raging boner for lease reform.
According to its August 17 exposure draft, FASB wants to eliminate operating leases which sucks because operating leases are easy. Debit, credit, done. Capital leases make me hate babies. If you do your four tests and your lease qualifies as a capital lease, you go back and get a longer better estimate of the underlying asset's useful life, or you get a higher more accurate discount rate – whatever it takes to get an operating lease. 
Here's the argument for reform. As accountants, a holy text has been bestowed upon us; it is the Conceptual Framework, and operating leases are an abomination unto it. Think it through. Every lessee (operating or capital) has "probable future sacrifices of economic benefits arising from present obligations … to transfer assets … to other entities," and every lessor has "probable future economic benefits … as a result of past transactions or events." (If you don't recognize the quotes, then there's a really good reason why you haven't passed FAR.) Therefore, according to the conceptual framework, ALL leases result in liabilities and assets. BUT, according to ASC 840-20-25, you don't have to recognize said assets or liabilities if it's an operating lease. Operating leases are a contradiction in GAAP. Eliminate operating leases, and you've eliminated the contradiction. No one needs your opinions or my opinions, so click the delete button near the top of your Outlook window.
If you're still determined to complete the survey, here's my analysis question by question:
1. Do you consider the preparation and presentation of financial statements as being significant for accounting users like lenders, investors, bankers etc?
Are you serious?!? The leading question is, "Do bankers rely on financial statements?" A more relevant question would be, "How many firms make up the Big 4?"
2. Do you believe that the consequences of IFRS and FASBs' new standard on Leasing transactions are likely to affect the borrowing and leasing activity and in so doing deprive companies of a cheap source of finance?
You got beat up a lot in middle school, and you grew up to be an accountant. Because an eighth grader robbed you of your power, you want to believe that tweaking one accounting standard has the potential to destroy the business landscape as we know it. It won't. Relax. Try to regain your sense of power by eating an entire bag of Oreos like a normal person. 
3. In your opinion will the capitalization of operating leases will [sic] affect company credit ratings? 
In my opinion this question is bullcrap. Any credit ratings that are based on a company's balance sheet will change. That's not an opinion; it's math.
4. Do you believe that a single model of accounting for all types of leases will provide a cornerstone for accuracy and transparency in financial reporting?
NO. Spreadsheet and database technology are the cornerstones of accuracy in financial reporting. Modifying one standard won't bring some kind of unprecedented transparency that's been missing from financial reporting for the past 40 years. Using grandiose language like "cornerstone of accuracy and transparency" makes me believe that you need to get laid.
The hell with this. Here are all the answers:
1.     Strongly agree
2.     Strongly disagree
3.     Not sure
4.     Go to hell
5.     Strongly disagree
6a.     Strongly agree
6b.     Strongly agree
6c.     Please learn English
7.     Not sure
8.     Strongly agree
9.     Strongly disagree
10.     Strongly disagree
So in conclusion, click the delete button located near the top of your Outlook window. 

Related articles

Face It People, Nothing Much Can Be Done About the Revolving Door

Revolving_Door2.jpgThere’s constant conspiracy theories bellyaching about certain companies getting their former big shots into public service and regulatory positions (we’re talking about you, Maxine Waters).
Well now there’s speculation about former Big 4 partners working at the IASB.
We get it, those who used to work at the big firms shouldn’t be writing the rules. So who the hell is going to do it? Shall we have the likes of Friehling & Horowitz appointed as the standard setters?
The large firms have the biggest pool to choose out of, so natch they’re going to have some of the better candidates to delve into this wonky rule-writing stuff. We’re probably lucky that there are people out there that actually want to serve on these boards, lots of Big 4 partners can barely turn on their computers.

IASB Discusses MD&A and No One Cares

Do you spend evenings and weekends reading annual reports as opposed to doing, say, anything? We thought so. So you’re definitely familiar with the cheerleading section in those glossy marketing pieces known as “Management Discussion and Analsyis” or “MD&A”.
Well the IASB has decided that MD&A isn’t worth getting too worked up about as three board members voted “meh”, against issuing an actual proposal that would give management guidance on content. Sayeth:

Because the proposal will not result in a financial reporting standard, issuing it is not an effective use of IASB resources or those of constituents who may feel an obligation to comment, say the three board members, Robert Garnett, Prabhakar Kalavacherla, and James Leisenring.

Common sense appears to be alive and kicking at the IASB. Hoo-RAH.

International Standard Setters Have Their Say on MD&A