Update on Proposed Accounting Rules

https://byobroker.wordpress.com/2011/08/18/chages-to-accounting-standards-will-affect-office-leases/

In a developing story (and a follow up to our Aug 11 post here ), the International Accounting Standards Board (IASB) is preparing a draft of proposed accounting changes that may have a dramatic effect on commercial real estate lessees, owners and investors.  The new rules call for companies to capitalize office and equipment leases as long term liabilities that diminish over time.  While this may bring US accounting standards more in line with international norms, it would also have the effect of increasing balance sheet liabilities and reducing access to capital.  From a commercial real estate perspective, signing a long term lease would negatively affect the amount of credit available to a company.  Shorter term leases usually mean higher rental rates, effectively raising the operating costs for a business.  Landlords, while getting higher rental rates, would see their property lose value as a building full of short term leases is not as valuable as one with long term leases.