Shopping Centers Today International

DEC 2015

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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to be completed in the second half of this year, but the next draft may not be issued until well into the coming year be- cause public comments are necessary, Laird points out. "It's by no means a done deal," she said. "And no one can say ex- actly what the future holds for this." Quaadman thinks clarity will come in the coming months, though. "I don't know how much more they are going to be able to kick this can down the road," Quaadman said. "There's still some back-and-forth go- ing on, but if the two bodies don't resolve their issues soon, I think they each may go in a different [policy] direction." The call for changes in lease-accounting standards dates back some 14 years to the 2001 collapse of energy-trader Enron, which used accounting tricks to hide liabilities. That spurred Congress to ask the Securities and Exchange Commission to investigate off-the-balance-sheet liabilities. Then, in the wake of last decade's financial crisis, the Group of Twenty international forum of governments and central-bank governors commonly known as the G-20 renewed that call, asking the accounting bod- ies in 2009 to "redouble efforts to achieve a single set of quality global accounting standards." Regulators contend that the new model will provide a far richer and more transparent data set to investors than is currently available, and that most credit-rating agencies, lenders and other financial concerns already factor in the effect of off-balance-sheet leases on leverage, making the ad- justment curve shorter. But in a July letter to the FASB, Rep. Brad Sherman of California questioned why no cost-benefit analysis has been done on the proposed new regulations, despite re- quests from 60 members of Congress. Additionally, he notes further, Sarbanes-Oxley requires SEC-designated orga- nizations, including the FASB, to weigh the costs and benefits for proposed new standards for public companies, but Congress has seen no such study. Mean- while, major accounting firms have already introduced pro- prietary software packages to comply with the standard, some of these costing some six figures — further evidence of higher compliance and implementation expenses than the boards are assuming,, the legislator says. In a 2014 Wall Street Journal op- ed, Sherman joined Rep. Peter King of New York to warn that the lease-accounting proposal would "fabricate trillions in new debt," raise the cost of capital and put millions of businesses in danger of violating their loan covenants. Not the entire international community is in accord with the IASB's direction, Quaadman says. The business communi- ties of several European and Asian countries have expressed deep concerns. Even Hans Hoogervorst, chairman of the IASB, said last year: "There is no simple answer. We have been strug- gling with this standard for many years." The rules will be far-reaching for many industries, Laird says. "It affects retailers, airline companies, manufacturers — everyone with tangible goods," she said. "There are tremendous ramifica- tions here." Businesses that have objected vary widely, and they include China Telecom, Delta Air Lines, Dollar General, Finn- ish banker FFFS, Swiss offshore driller Noble Corp., and Austra- lian retail, energy and insurance conglomerate Wesfarmers Ltd. Moynihan cautions companies to begin adjusting now to more effectively manage the process and minimize the surprises. He says he does not expect the transition to be an easy one in the financial community: "The changes will certainly require some getting used to for analysts, investors and the like." SCT "It affects retailers, airlines, manufacturers — everyone with tangible goods. " 130 S C T / D e c e m b e r 2 0 1 5

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