External Affairs Alert – February 2014 – Professional Practice Perspective

FASB-IASB Lease Accounting Saga Moves Into a Fourth Year

The US Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) have been working together on a Lease Accounting project since late 2009/early 2010. The original proposal was released in August 2010 and created significant controversy in the real estate community.

After multiple meetings and discussions with key stakeholders, FASB issued a revised Exposure Draft on May 16, 2013 entitled Leases (Topic 842): a revision of the proposed 2010 Accounting Standards Update, Leases (Topic 840). FASB and IASB held more than 35 separate meetings with more than 220 investors and analysts to obtain feedback between May and September of 2013. Interested parties submitted 598 comment letters.

The current plan of action calls for FASB and IASB to “…consider all feedback and begin redeliberations of all significant issues in the first quarter of 2014.”

Counselors interested in or impacted by this issue can follow the status on the FASB website (www.FASB.org) under Projects/International Convergence/Overview (scroll down and click on “Leases”).

For Counselors Who Provide and/or Use Valuation Services

2014-2015 Edition of USPAP: The Appraisal Standards Board (“ASB”) of the Appraisal Foundation has published the 2014-2015 Edition of the Uniform Standards of Professional Appraisal Practice (“USPAP”), effective January 1, 2014.

The ASB did retire Standards 4 and 5 (Appraisal Consulting) and the related references and definitions as noted in prior Professional Practice Sector updates. For Counselors who provide valuation services, the following phrase can be used to avoid any confusion in written counseling reports in non-valuation assignments: This is a real estate counseling service outside the scope of the Uniform Standards of Professional Appraisal Practice. Make sure that any certification included in the report of a non-valuation counseling assignment eliminates any reference to compliance with USPAP.

First Exposure Draft for 2016-2017 Edition of USPAP: The ASB has circulated a First Exposure Draft of proposed changes to the 2016-2017 Edition of USPAP. The comment deadline is February 17, 2014. The ASB expects to issue two more Exposure Drafts after reviewing the initial comments. Final changes will be adopted in early 2015.

Two issues of potential interest to Counselors are addressed in the Exposure Draft:

  1. Revision of the Report definition and considering definitions of Draft Report and/or Draft are proposed.
  2. The ASB is also seeking opinions on whether to retire the remaining Statements on Appraisal Standards and eliminating Statements from the document.

Interested Counselors should make comment to the ASB by the deadline. The First Exposure Draft including the complete text of the proposed changes and instructions for submitting comments is available at www.appraisalfoundation.org by clicking on ASB Exposure Drafts.

Rocky Mountain Institute (RMI) Releases Guide for Valuing Energy Efficiency and Sustainability in Owner-Occupied Space and Seeks Collaborators for a Guide Addressing Investor Space.

A new RMI practice guide released during the week of January 27-31, 2013, represents a milestone in the industry’s quest to provide a practical and more easily accessible foundation for properly integrating value and risk into sustainable property investment decisions.

In this first practice guide, RMI chose to focus on owner-occupants because they own a substantial portion of commercial real estate and often lease overflow space. Investors will also benefit from the guide since understanding how their customers (occupants) value building energy efficiency and sustainability is fundamental to their business. For service and product providers, the guide will help them understand how sustainable investment creates value, enabling them to improve sales through refinement of products and services to better meet customer financial objectives.

For consultants, appraisers, and advisors involved in real estate and sustainability, the methodology presented in the practice guide provides a strong basis for the development of new products and services to improve decision-making to assist clients in maximizing the value they create from their investment in property-related sustainability.

How to Calculate and Present Deep Retrofit Value for Owner Occupants can be downloaded at no cost using the following link: http://www.rmi.org/retrofit_depot_deepretrofitvalue.