Accounting rule changes, in the works for several years, are likely to have a mixed effect on the market for securitization of equipment leases. They could curtail leasing of new, large equipment, but lessors may have additional incentives to securitize the leases that they do make.
The second version of the Financial Accounting Standards Board’s proposal to update accounting for leases may be less controversial than the first. A major bone of contention around the FASB’s 2010 proposal was its complex requirements for real estate leases, such as factoring in whether a lease would be renewed or not. Those elements have largely been smoothed over, but the proposal nevertheless could significantly change how lessees recognize their lease-related expenses and affect their equipment-sourcing decisions, potentially impacting the volume of leases available to securitize. Lessors, on the other hand, would be able to move securitizations of leases for big-ticket items off-balance sheet, which is not possible under current accounting rules.