The case of the Ruben on wry
Charles Selcer, CPA, MBA | December/January 2018-19 Footnote
Grylld Ruben, CPA just signed a lease renewal in October 2018 for his CPA firm's office space with its landlord, Magnanimous Realty, LLC. Magnanimous Realty is a review client of his firm, Spackle, Krackel and Yackel, CPA (SKY) and, at the time of signing the three-year lease, would be classified under then-prevailing generally accepted accounting principles (GAAP) as an operating lease.
The firm is worried that the new lease term will extend into a period governed by the new lease accounting standard, and they will lose their independence at that transition moment.
Q. Should SKY be worried?
A. Probably not. The Professional Ethics Executive Committee (PEEC) is considering a transitional rule that will provide relief for leases entered into before Dec. 31, 2019, that met the pre-existing requirements of the Independence Rule 1.200.001, and that are not renegotiated during the period of professional engagement. Automatic renewals are not considered a renegotiation. While this has not been put into effect yet, it is the current PEEC viewpoint. Stay tuned.