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LETTER TO THE EDITOR

FASB’s position on leases standard
is ‘insensitive’

I read your article from Nov. 10, 2021, “FASB National Advanced Accounting and Auditing
Declines to Extend Nonpublic Lease Accounting Technical Symposium) and to FASB’s Private Com-
Effective Date,” regarding the FASB meeting that pany Council — there are two regulated entities in
same day. California that are going to suffer because of the
It was very disappointing to hear the FASB’s new standard. One is underwritten title companies
decision and perhaps even more disappointing to regulated by the California Department of Insur-
listen to the board’s reasons. ance, and one is independent escrow companies
FASB Chair Richard Jones said: “I would regulated by the California Department of Financial
encourage all parties to get going on this.” This is Protection and Innovation.
insensitive at best to what nonpublic companies Through no fault of their own, it is possible that
have to do “to get going on this.” entities will go from being in compliance with a
FASB’s staff saying “financial statement users are regulatory covenant on Dec. 30, 2022, to being out
ready for reporting on leases by private companies of compliance on Dec. 31, 2022, with no change to
to match that of their public company peers” is in the balance sheet.
the same vein of being generic without sensitivity to The insensitivity I referred to above is that the
who these nonpublic entities are. majority of these entities — and I am guessing
Without getting into opinions and perspective this includes the type of entities the Pennsylvania
on the history of this standard going back how Institute of CPAs was writing on behalf of — are
many years, it seems FASB needs a reality check as small privately owned companies that do not have
to who the entities are and who the actual users are accounting departments or even accounting personnel
relative to these entities. other than the owners who do their best at Quick-
It is an easy solution for the entities that have no Books. They have no capability of doing the mechan-
necessity from “users” to follow FASB ASC Topic ics of the lease accounting standard, and so now they
842, Leases, to carve it out and create a GAAP will have to pay more in accounting fees to us or to
exception. But it is the entities that have regulatory other similar professionals to be in compliance. The
covenants and are required to have GAAS/GAAP standard is not an easy one to implement. The more
financial statements and disclosures that are being we have worked with it on a few clients, the more we
injured by an accounting standard that has noth- have come to understand how complex it is.
ing to do with their operations or their regulatory
purpose. Michael C. Haas, CPA
For example — and this has been brought up Haas and Dawe
both to FASB (in written form and at the AICPA Burbank, Calif.

4 | Journal of Accountancy February 2022