The word is the US might have to adopt IFRS. By mid 2011, the SEC will take the decision. Then 5 years to implement the shift.
There was love at first sight when I saw that some of the US GAAP rules are implemented by statistically looking at their use in the markets.
IFRS allows for immediate recognition of the gain or loss in a sale-leaseback operating lease transaction. They are two transactions; therefore, they "must" be independent. You can recognize a gain because the sale of the asset is completely independent from the lease back even though you never lost the asset.
On the other hand, the musical complexity :) of FASB did statistical analysis in the field and found that the great majority of the companies recorded both transactions at the same time (the sale and the leaseback of the asset). Given that every company has both transactions at the same time, it makes it one. The sale looses its immediate overall economical substance because it is tied to future payments. Therefore, FASB simplifies the world by recognizing it is not a sale and a leaseback of an asset. It is financing. You get a chunk of money, you keep the asset, and you make payment as if it was any other debt. The gain on the sale has to be amortized along the "debt" payments.
It is not just a a matter of implementing someone else's rules. It seems there is a major difference in the approach. The agility will be lost.
I believe in Principles. Some things are wrong. If they are not spoken and written that way, after a few years, people start to get comfortable with the proximity to the limit. But at the same time, principles are also the random punishment machine of the state. Without very clearly specified rules, Principles become the reality show of who is cool at the moment, and the uncool is left without specific rules to know you are safe.
Five or Six years is also the hibernating time for a trip to the land of Pandora. Is it a coincidence, or we are just being prepared for the journey to La La Land?
