The argument is specious for two reasons. First, the Financial Accounting Standards Board always includes in its statements the remark that "The provisions of this Statement need not be applied to immaterial items." Thus, materiality does not serve as a guide when choosing accounting principles. Second, the statistic he cites is misleading because quite a few business enterprises will face a gargantuan impact on their financial statements if they have to capitalize the future minimum lease payments.

Consider CVS as an example. Similar to most retailers, CVS leases many of its stores throughout the country. CVS structures these transactions in such a way that it may categorize most of its leases as operating leases and thereby not disclose a significant amount of its liabilities. While this treatment is permissible under current FASB rules, it shows disrespect for the investment community. And the amounts are quite material.

Employing data disclosed in the 10-K, one can recast the numbers as if CVS employed capital lease accounting. Carrying out this analysis generates the following results for CVS (all numbers are in millions of dollars).

	Reported	Adjusted
Current assets	$ 8,392.7	$ 8,392.7
Long-term assets	6,890.7	16,164.7
Total assets	$15,283.4	$24,557.4
Current debts	$ 4,583.9	$ 5,757.9
Long-term debts	2,383.3	13,960.3
Stockholders’ equity	8,331.2	4,839.2
Total equities	$15,283.4	$24,557.4

There are three major differences between the reported balance sheet issued by CVS and the adjusted balance sheet that more accurately reflects the economic reality facing the company. First, the leased assets become part of the resources depicted on the balance sheet, an amount that is just shy of $10 billion. This amount represents significant property rights that CVS is not currently disclosing on its balance sheet.

Second, the recast numbers reveal a stockholders' equity number that is approximately 42 percent less than what CVS claims. This deterioration is a consequence of the firm's not depreciating these leased assets and not computing the interest costs on the lease obligations. By omitting these costs, CVS is able to pump up the stockholders' equity and make it look better than it actually is.

Third, and most importantly, CVS neglects to divulge $11.592 billion of long-term obligations and $1.174 billion of short-term obligations. In other words, CVS financial reports are hiding $12.766 billion of debt. That’s a lot of debt to conceal from shareholders and creditors.

The capitalization on the asset side is an increase of approximately 60 percent, while the capitalization on the liability side is an increase of approximately 183 percent. These increments clearly have material effects, and I hope that Mr. Bosco acknowledges this fact. Because of these colossal consequences from capitalization, it is important that FASB get the accounting right this time. Let's hope FASB can dodge the political bullets that will fly -- and indeed are whizzing around at this time -- and improve the accounting for leases.