7/7/2015

After reviewing some literature about the current accounting developments, I am arriving at the conclusion that if nothing else changes in leveraged lease reporting from the lessor side, it is highly likely that the MISFM is history. It is a positive development as the method had no basis in logic or good discounted cash flow techniques. Along with the elimination of the MISFM will likely go the elimination of all after tax techniques in the accounting for leveraged leases on the lessor side. That is too bad! I am not certain what is driving leveraged deals today. I have read that few are getting done. Perhaps the lowering of effective tax rates, the off-shoring of income and other avenues of shelter have made the need for leveraged deals less. Lower interest rates also reduce the need for tax benefits. Whatever the reasons, the MISFM never had a place in good DCF theory or practice. It's only reason for existence was that it was used in distributing income in the leveraged lease lessor reporting arena. If that goes away it has no reason to ever exist (except to review past bad reporting). RIP MISFM...you were born from ignorance, lived in glory, and died in ignominy. You drove the boom in the leasing industry for such greats as GE Capital for many years, and for that you deserve your glory.