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November 17, 2015

FASB votes to proceed with final standard on leases

U.S.--The  Financial Accounting Standards Board voted to proceed with a new accounting standard that would require companies and other organizations to include lease obligations on their balance sheets. The final accounting standards update is expected to be published in early 2016.

The FASB decided that for public companies, the upcoming standard will be effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018. The standard will not take effect for private companies until 2019.

As a next step, the FASB staff will complete a ballot draft of the update, which includes all of the board’s final decisions. The ballot draft will be shared with each of the seven board members, who will review it to ensure that it accurately reflects decisions made throughout their public deliberations. When the board is satisfied that the ballot draft reflects its intentions, the draft will be submitted to production for final publication.

“We believe that this new standard is important because it will provide investors, lenders and other users of financial statements a more accurate picture of the long-term financial obligations of the companies to which they provide capital,” said FASB Chairman Russell G. Golden.

The leases project was added to the FASB’s joint agenda with the International Accounting Standards Board in response to concerns from investors, other financial statement users and the U.S. Securities and Exchange Commission regarding the lack of transparency related to material lease obligations that have been reported off-balance sheet.

One of the much awaited developments in the internationalisation of the RMB is its inclusion in IMF’s Special Drawing Rights (SDR).  The Head of the IMF, Christine Lagarde, announced that the IMF’s staff issued a paper to the Executive Board on the quinquennial review of the SDR on Friday stating that they believe the RMB meets the requirements to be a “freely usable” currency and, accordingly, the staff proposes that the Executive Board include the RMB in the SDR basket as a fifth currency.

Paul Mackel, Head of Global Emerging Markets FX Research, HSBC said, “The finish line is quickly approaching for the RMB to be included in the IMF’s SDR. The recommendation by IMF's staff for the RMB to be included in the fund's Special Drawing Rights (SDR) signals a high chance that the RMB will be included in this basket of international reserve assets, alongside the USD, EUR, GBP and JPY. This development sends an important message that China has been meeting the right criteria for the RMB to be deemed a 'freely usable' currency.”

“The RMB should benefit in the near-term but this should be temporary. We see USD-RMB ending 2015 at 6.50 and expect gradual RMB weakness with greater two way volatility next year. Over time, the confidence and usage of the RMB would be supported if it is in the SDR, due to the very stringent requirements for a currency to be included. So this serves as a sign of quality assurance for global users that the currency in question is very liquid and is stable as a store of value. SDR inclusion would also encourage China to stay on the reform track, which is important for investors' confidence. ”

“The significance of the RMB's SDR inclusion goes beyond the potential impact of inflows into China. It would encourage China to stick to a much needed financial and capital account liberalization. These would over time increase financial sophistication and improve the efficiency of capital allocation, facilitating the shift to a more consumption and service driven economy. It should give China confidence in making its exchange change rate even more market driven, which would free up its monetary policy. The SDR marks an important milestone of RMB internationalisation.”

 

 

 

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