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ARTICLE · 04 AUGUST 2005

The Quiet Giant: Restating Lease Accounting

DLA Piper Rudnick Gray Cary
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In recent years, businesses such as WorldCom and Enron have become synonymous with corporate malfeasance and questionable accounting practices. In the midst of such infamous cases of corporate wrongdoing, hundreds of well-intentioned retail and restaurant companies have been similarly labeled by federal regulators as engaging in questionable accounting because of the way they have been accounting for leases.

United StatesAccounting and Audit
John Saia
John Saia

Originally published in Shopping Center Business, August 2005,
© 2005 France Publications, Inc. Atlanta, Georgia

In recent years, businesses such as WorldCom and Enron have become synonymous with corporate malfeasance and questionable accounting practices. In the midst of such infamous cases of corporate wrongdoing, hundreds of well-intentioned retail and restaurant companies have been similarly labeled by federal regulators as engaging in questionable accounting because of the way they have been accounting for leases.

On February 7, 2005, the staff of the Securities and Exchange Commission (SEC) issued a public letter clarifying the application of generally accepted accounting principles (GAAP) to lease accounting. According to the new statement, many public companies have been misapplying GAAP for nearly 30 years with the approval of independent auditors and without comment by the SEC.

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