Fasb Project

Olivia Maund

11373585

9/2/2016

FASB Project

1. J&J’s primary concern related to the proposed guidance is that even though the Board simplified some things from the original proposal, a lot of the remaining elements are still very complex. J&J says that they will need many resources and will have to spend a lot of time and money to comply with the elements in the proposal. They are raising this concern is from the financial statement preparers perspective because of how long it will take them to comply with the proposal. However, the proposal will create greater ease for the financial statement users.

1. A step that J&J has already taken to evaluate or prepare for the proposed standard is the implantation of a system to collect and maintain lease data in anticipation of adopting the Accounting Standards Update (ASU).

1. The FASB asked J&J to maintain large master lease agreements for things like automobiles, cars, and small IT equipment. This is very difficult considering the volume of leases they have. J&J recommended that the FASB give guidance for recognition and valuation of groupings such as, “like leased assets.” Groupings of “like assets” could mean similar classes of assets like copiers, computers, or fleet cars, with similar useful lives. J&J’s rational for this recommendation is that would limit the total number of leases to be administered.

1. The ABA is writing this from the perspective of the user and preparers of financial statements. I say from the user’s perspective because it says it will cost users more money to adjust their lease contracts and from the preparers perspective because they have to adjust all of the customer’s lease contracts.

1. Some of the concerns the ABA raises from the user perspective are that users will incur additional costs within the transition period of changing the contractual infrastructure of the leases due to the FASB’s new proposed standard. In addition to changing the leases, banks will then need to contact all costumers and inform them of the change to the leases which may cause these users to renegotiate the terms of their lease agreements which requires legal counsel. The banks may have to pay for this legal counsel and get every customer’s signature for the lease change. These two things are just some of the ways that users will incur additional costs because of the change.

1. ABA recommends that a minimum of two or three years will be needed to transition into the new lease standard because of the volume of customers and complexity of the new standard.