In a 4 to 3 vote, the FASB voted yesterday (April 10, 2013) to move ahead and re-release the New Lease Accounting Exposure draft which will be converged with that of the International Accounting Standards Board (IASB). The divided FASB vote underscores just how difficult the process of establishing new guidelines for leases has been. The proposed rules postulate two different methods to account for leases.

In general, equipment and vehicle leases that tend to depreciate significantly during the life of a lease would be accounted for differently from leases of real estate, in which the asset usually does not depreciate and sometimes increases in value over the lease period.

Note: Read the following blogs to learn more about capital and operating leases:

Operating Lease Accounting under the New Standard, ASC 842: Full Example and Explanation

Capital Lease Accounting and Finance Lease Accounting: A Full Example

The dissenting members of the board argued that the proposal introduces significant complexity for users because it divulges lease information in multiple places in the financial statements without bringing it all together in one footnote. They believe that the proposal has become complicated because the board has tried to create a single model for all leases when there isn’t agreement on how all leases should be treated.

On the other hand, those supporting the change did so because they felt it represents an improvement over current accounting, where leases are often structured in a way that enables them to escape recognition. They argued that the proposals eliminate the concept where minor changes in the economics will have drastic differences in the balance sheet. The Board plans to re-issue the exposure draft by June 2013.