[fitchjo]

I would like to caveat by explanation by saying I am admittedly less versed in IFRS than US GAAP, so there may be some technical differences between the two, but the spirit should be the same - there is actually corresponding gross up of your assets, equal to the net present value of your minimum lease payments, when you put the lease obligation on your balance sheet.

So at the the time you sign a new lease, you will put an asset and liability of equivalent value on the books. Assuming the useful life of the asset extends past the lease term, general expectation is that the asset value would be amortized over the term of the lease, and at the same time, interest expense will be recorded on the lease obligation. Ultimately the same amount of expense will be recorded (equal to the minimum lease payments), but the timing of the expense is different as it front loads the expense (because of the interest accretion). So you have that and the balance sheet gross up that will be different. The change, in theory, provides greater transparency related to what can be a significant obligation for a company.

[lucas_membrane]

> the timing of the expense is different as it front loads the expense (because of the interest accretion)

I would expect that if a firm could make a good case to its auditors that the revenue derived from the use of the leased asset was expected to be higher during the early years or lower during the later years, or vice versa, then the auditors would allow a timing adjustment somewhere.

If my corporation has just signed a 12-year operating lease for some property in Los Angeles with the intention of profitably obtaining revenue from the property only during the 2028 Olympics, do these accounting rules lock me into such unrealistic reporting?

Many years back, I spent quite a bit of time on similar but different issues of recognition of revenue and expense, and it seemed that if one could make a good case, there was flexibility, but everyone wanted to abuse it. Is the flexibility still available in reasonable cases, gone now in general, or gone only for specific classes of contracts like operating leases?