Prepare For Change: New Lease Accounting Rules to Affect Retail, Restaurant Industries

The Financial Accounting Standards Board (FASB) and its international affiliate, the International Accounting Standards Board (IASB), are currently reviewing proposed new lease accounting rules that, if approved, will significantly affect the retail and restaurant industries.

The new rules will impact the retail and restaurant industries more than others because they will require companies to record on their financials the enormous number of leases for the nation's shops and eateries. The rules will not allow grandfathering of existing leases, will require that lease option periods be considered and recorded for the longest period more likely than not to occur, and will even mandate that contingent rents such as percentage rent be estimated and booked.