Title

Preparing for the Looming Changes in Lease Accounting: A Technological Solution for the Informational Problem

SMC Affiliated Work

1

Status

Faculty

School

School of Economics and Business Administration

Department

Accounting

Document Type

Article

Publication Date

2015

Publication Title

The CPA Journal

Description/Abstract

Donald Rumsfeld famously stated, “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.” Rumsfeld's statement can be applied to our state of knowledge regarding the accounting for operating leases in the future. There is general agreement (that is, a “known known”) that new standards will require lessees to report most of the assets and related liabilities associated with operating leases on the balance sheet—a significant change from current off-balance-sheet reporting. A “known unknown” is the final form of the accounting standard, including the way leases will be classified (e.g., not operating, but what instead?), and the specific patterns of expense recognition for leases newly recognized on the balance sheet. The “unknown unknowns” can apply to lessee companies that do not yet understand the extent of the preparation and data gathering they face in order to be ready by the new standard's effective date (whenever that proves to be).

Keywords

Uncertainty, Portfolio management, Operating leases, Information management, Accounting changes

Scholarly

yes

Peer Reviewed

1

Volume

85

Issue

1

First Page

38

Last Page

42

Disciplines

Business | Economics

Original Citation

Chambers, D., Dooley, J., & Finger, C. (2015). Preparing for the looming changes in lease accounting: A technological solution for the informational problem. The CPA Journal, January, 85(1), 38-42.

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