The Financial Accounting Standards Board, FASB, and the International Accounting Standards Board, IASB, have signaled a modification to their approach on lease accounting rules for investment property owners/lessors. The Boards decided that a lessor of investment property would not be required to apply the proposed residual and receivable approach outlined in the initial Exposure Draft, if the lessor measures its investment properties at fair value by electing the fair value model under IAS 40, Investment Property.

This gives many real estate lessors the opportunity to continue to use operating lease accounting rules, effectively meaning no change to the existing methodology.

What does this mean for Lessees?

The Boards will likely receive requests to reconsider previous decisions on lessee accounting, such as requiring a single income statement recognition model for all leases, including leases of real estate.

Of course the proof is in the pudding so we should keep an eye out for the next official draft of the accounting rules expected first quarter of 2012.