Real Estate Investment Trusts Request Clarification About Fee Reporting Requirements

Several commercial property real estate investment trusts have asked FASB to reconsider part of its much-watched lease accounting standard so they do not have to separately account for services that typically are calculated into a tenant’s rent. The standard requires landlords to isolate the price of fees such as snow removal or building maintenance and account for them apart from the actual real estate rental. “There’s a challenge in trying to quantify the market value of each of those pieces because there’s not market information that’s readily published or available that values those pieces,” said the senior vice president and controller of one realty firm. “Even if we split them out or report them separately, we’re not expecting there to be any significant difference in the pattern of the recognition of the revenue.” While FASB does not typically respond publicly to unsolicited comment letters, a spokesperson said the board would “certainly” consider the request.

Loan Loss Standard’s Credit Card Guidance Receives Another Look

FASB decided at its October 4 meeting whether it should clarify its loan loss standard to make it easier for credit card issuers to estimate a maturity date for their card receivables. The standard, considered FASB’s most important response to the 2008 financial crisis, requires banks and other financial firms to estimate future losses on loans and some debt securities and book reserves accordingly. The standard is intended to fix the problem of banks not writing down their loans until the losses were so extreme that banks either failed or had to be bailed out. It erases the U.S. GAAP requirement that requires losses to be recorded only after they are “probable,” which in practice means after customers have missed payments and the losses are well apparent.

Proposal Offers Technical Corrections, Limited Changes to Standards for Leases, Financial Instruments

On September 27, FASB released a draft version of corrections for public comment and minor revisions to its standards on lease contracts and the classification and measurement of financial instruments. The proposed changes are considered to be relatively limited and are not expected to have a significant effect on financial reporting or create a significant administrative cost for most entities. “The amendments in this proposed update are of a similar nature to the items typically addressed in the Codification improvements project,” the FASB wrote in the proposal’s introduction. Comments are due by November 13.