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Proposed Lease Accounting Standards to Cost 190,000 Jobs & $10.2 Billion Annually

February 17, 2012, 07:30 AM
Filed Under: Regulatory News

A coalition of several leading nonprofit and commercial organizations, including the U.S. Chamber of Commerce, released a report today that examines the economic impact of the International Accounting Standards Board (IASB) and Financial Accounting Standards Board’s (FASB) proposed lease accounting standard.  The study, The Economic Impact of the current IASB and FASB Exposure Draft on Leases, specifically looks at how the proposed standard would negatively impact job creation, the health of the U.S. real estate sector, and liabilities of U.S. publicly traded companies.
The report analyzes the current proposal and under a best case scenario estimated its economic impacts as:

-    Increasing liabilities for U.S. public companies by $1.5 trillion;
-    Increasing costs to U.S. public companies by $10.2 billion annually;
-    Potentially leading to job losses of over 190,000;
-    Reducing U.S. household earnings by $7.8 billion annually; and
-    Lowering U.S. GDP by $27.5 billion annually.

The coalition is calling on the Boards to conduct a comprehensive examination of the costs and benefits.  A failure to fully understand the economic ramifications of these accounting changes or to address these issues may harm businesses that own, invest, or rent commercial real estate or use leases for other purposes from office equipment to construction machinery.  Thoroughly vetted and sound accounting standards are needed to create certainty in the marketplace for investors and businesses alike.

The report was commissioned by several of the leading nonprofit and commercial organizations concerned with economic growth in the United States and in the health of the real estate sector in particular. The members of the coalition include the U.S. Chamber of Commerce, the Real Estate Roundtable, NAIOP, Commercial Real Estate Development Association, NAIOP Inland Empire Chapter, NAIOP Southern California Chapter, the National Association of Realtors and the Building Owners and Managers Association International. The coalition's objective in sponsoring the study is to ensure that the analysis of costs and benefits of proposed new accounting standards for leases includes a thorough consideration of the economics of commercial and industrial real estate leasing and development.  Any changes to financial reporting should not distort market behavior and cause damage to both the real estate market and the national economy.

Since its inception in 2007, the Center for Capital Markets Competitiveness (CCMC) has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

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