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ASBCA Holds that Leases are not Necessarily Subject to CAS 404

In Exelis, Inc., ASBCA No. 60131 (29 Aug. 2016), the Armed Services Board of Contract Appeals (“ASBCA”) held that a concern whether a building lease was a capital lease or an operating lease is not subject to Cost Accounting Standards (“CAS”) 404. In 2007, the Defense Contract Audit Agency (“DCAA”) released its audit of Exelis’ 2004 final indirect cost rates. DCAA questioned Exelis’ lease costs, finding that the building lease was a capital lease instead of an operating lease as claimed by Exelis and that Exelis could only include building depreciation in its indirect cost pool rather than the entire. Read More.

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Comment Letters Ask FASB to Limit Future Projects

Some trade groups want the Financial Accounting Standards Board (“FASB”) to provide more leeway for implementing current accounting standards before taking on new projects. In feedback to the FASB’s Invitation to Comment, Agenda Consultation, groups like the American Bankers Association (“ABA”) asked the board to consider the time and costs needed when new standards are implemented. The ABA also noted that standards involving revenue, leases, credit losses and financial instrument measurement and classification require significant undertaking that could last over several years. Other comment letters to the agenda consultation document came from the Institute of Management Accountants (“IMA”), which advised. Read More.

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FASB Issues Lease Accounting Standard

Today, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The long-awaited guidance is intended to improve financial reporting for leasing transactions. The FASB estimates that there is over $1 trillion of off-balance sheet operating lease commitments for SEC registrants based on a 2005 Securities and Exchange Commission report. The new guidance will require lessees to recognize a right of use asset and related lease liability. Using the classification similar to Topic 840, the ASU identifies financing leases and operating leases. Financing leases would recognize amortization and interest expenses, while operating leases would. Read More.

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Trade Groups Make Final Plea for Leases Standard Exemption

As the Financial Accounting Standards Board (“FASB”) prepares its lease accounting standard for publication, several trade groups made a last-minute attempt to have private companies exempt from the upcoming guidance. In a letter last month, the groups expressed concern that the final standard will increase complexity and not meet the needs of private business investors. The groups also believe that the extensive changes to lease accounting will hurt private companies, and cap their chances of borrowing or raising capital. The FASB has responded to several comment letters in relation to proposed Accounting Standards Update (ASU) No. 2013-270, Leases (Topic 842).. Read More.

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