Friday, June 25, 2010

Leases in business acquisitions

Under FAS 13, if a business acquires another business that has capital leases, the lease is re-evaluated. The present value of the rents is the new obligation, while the asset is booked at fair value, which may be a different amount.

The FASB has decided, in a June 23 meeting, that this will no longer be the case. Instead, under the new lease accounting standard, an acquirer will account for the lease as if it were a new lease starting on the day of acquisition, and otherwise account for it as any other lease.

A rare win for simplification as part of the lease accounting revision...

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