Welcome

Moody’s Warns Lease Accounting Delays Will Harm Investors

Aug. 19, 2019, 9:50 PM

Investors and analysts lose out if U.S. accounting rulemakers further delay when private companies adopt major new lease accounting rules, Moody’s Investors Service said.

The Financial Accounting Standards Board’s “eleventh-hour” move to offer private companies an extra year—until 2021—to report leases on their balance sheets will hinder investors’ ability to compare the financial health of similar companies like Office Depot, Inc., a public company, versus Staples, Inc., which is privately held, Moody’s said in an Aug. 19 report.

“They’re focused on talking about private companies being these really small, unsophisticated companies that can’t keep up with these complex accounting standards, when in fact there’s a lot of very large companies that are private or private-equity owned,” said Kevyn Dillow, senior accounting analyst at Moody’s.

  • Public companies adopted the lease accounting standard in 2019. Private companies were scheduled to follow the rules in 2020. Many private companies told FASB they weren’t ready to implement it on time.
  • FASB on Aug. 15 proposed giving private companies an extra year to adopt lease changes. It was issued in a proposal that also offered more time for private companies to follow new hedge accounting rules as well as new accounting for credit losses. Comments are due by Sept. 16.
  • Public company financial statements offer more transparency than those of private companies, Moody’s said, because they must comply with SEC regulations and often include internal audit controls.

To contact the reporter on this story: Nicola M. White in Washington at nwhite@bloombergtax.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Steven Marcy at smarcy@bloombergtax.com

To read more articles log in. To learn more about a subscription click here.