Grant Thornton LLP Supports Review of Lease Accounting Rules as FASB/IASB Working Group is Named

First meeting set for February 2007

CHICAGO--(BUSINESS WIRE)--Grant Thornton LLP, the U.S. member firm of Grant Thornton International, a global accounting organization with operations in more than 110 countries, today announced that it supports the need to review lease accounting standards as announced by the Financial Accounting Standards Board (FASB). This month, the FASB and International Accounting Standards Board (IASB) announced a new international working group to reconsider their standards on lease accounting, with a first meeting scheduled for February 2007.

“The current lease standards need to be changed to give investors greater transparency in the reporting of financial information”

"The current lease standards need to be changed to give investors greater transparency in the reporting of financial information," said Grant Thornton LLP CEO Edward Nusbaum.

While there will most likely be strong disagreement, there also appears to be strong support for this move from CFO's and Senior Comptrollers, as evidenced in the most recent Grant Thornton CFO Survey. When asked "should lease accounting rules be revised to give investors more transparency," 63% said yes.

Standard & Poor's estimates the impact in moving the assets and obligations to the balance sheet to be hundreds of billions of dollars, while the SEC estimates the total undiscounted liability for operating leases of listed companies at $1.25 trillion.

What's wrong with the current accounting rules? Well, imagine an airline that has no planes, or a hotel chain with no hotels on their balance sheet. The current rules only record a lease on the balance sheet if the lessee has constructive ownership of the asset.

There is a complex list of criteria that determines whether a lease must be recorded. Otherwise, it can be classified as an operating lease. Both the asset and the obligation for future lease payments stay off the balance sheet.

Grant Thornton LLP is the U.S. member firm of Grant Thornton International. Through member firms in 110 countries, including 50 offices in the United States, the partners and employees of Grant Thornton member firms provide personalized attention and the highest quality service to public and private clients around the globe. Visit Grant Thornton LLP at www.GrantThornton.com.