Accounting News

Thursday, June 14, 2012
Agreement on Lease Expenses Reached

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have reached and agreement on the thorny issue of lease expenses. The two organizations had disagreed on an approach during meetings held in London last winter.

The FASB wanted to use and interest-based amortization method while the IASB wanted it to be amortized based on a consumption of value method. The boards have agreed to a method where some leases would use the 2010 exposure draft while others would use a straight line method.

This is a tentative agreement and must be approved by both organizations. These negotiations are part of the goal of a 2013 convergence of accounting standards between the two organizations. But as we have mentioned before that would still not include any Islamic accounting standards.

While many small business owners don't think that these agreements have any impact on them they are only partially correct. By creating a common accounting standard it is easier to operate businesses across borders. As the world shrinks that will impact more and more businesses. Using good accounting standards makes it easier for owners and investors to analyze the operations of a business.

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