Faculty Scholarship 1994 - Present
Accounting for Leases: Will the Revised 'Principles-based' Standard After Convergence with IASB Eliminate Future Accounting Manipulations?
The purpose of this paper is to examine the proposed ?principles-based? standard for accounting for leases that the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are currently finalizing. This standard will be the first joint project undertaken by the two standard-setting bodies as they work towards a set of converged standards for the future. The current accounting standard in the U.S. is believed to be a perfect example of a ?rules-based? standard that is open to manipulations. This has been documented in some of the previously investigated accounting manipulations by companies like Enron, IBM and others. The proposed standard is designed to be ?principles-based? allowing for the accountants? and auditors? judgmental determination of whether a lease should be accounted for as a capital lease or an operating lease. In this paper we examine the provisions of the proposed standard to study if the proposed standard will truly eliminate accounting manipulations.