The Financial Accounting Standards Board, usually referred to by its initials -- FASB -- makes the rules for how companies in the United States do its books. Over the years, FASB's standards have differed from those set by the International Accounting Standards Board (IASB) for use in other countries. As the world economy continues to shrink and globalize, a movement to synchronize US and foreign accounting standards has been gathering steam. One of the many standards that is in the process of being synchronized is FASB 13, which defines how companies account for their leases.

Right now, leases come in two types: capital leases and operating leases. An operating lease is the structure that you might use for a leased copy machine or computer. When you have an operating lease, you keep the transaction off of your balance sheet and you record your lease payments as expenses, directly reducing your profit.

A capital lease is treated more like owning an asset and is designed for longer-term arrangements with major capital equipment. With a capital lease, the leased value of the item goes on your balance sheet as an asset. Your monthly payments are treated as a mixture of interest, which is expensed, and depreciation, which gets used to reduce the value of the asset.

Thanks to quirks in the current FASB standard, companies can choose to treat real estate leases as operating or capital leases. Many choose to treat even the types of long-term leases that get signed on single-tenant assets as operating leases. This lets them keep debts and assets off of their balance sheets, improving their operating ratios, and also gives them a clear path to tax deductibility for their entire lease payment.

The international standard is much less flexible than the domestic one. Under IASB standards, most real estate leases get treated as capital leases. If your company was overseas, this means that you would be treating your leases much like mortgages and expensing them as such.

Attempts to fix the discrepancy between FASB and IASB standards started in 2005 with a report from the Securities and Exchange Commission highlighting the lack of transparency in the treatment of operating leases. Since then, the two accounting boards have been working on a solution. Currently, the draft solution creates two new types of leases -- Type A and Type B -- with one common thread. Both go on the balance sheet.

Without knowing exactly what will change, it can be hard to predict exactly what the new FASB standards will do, but there are some basic business facts that remain the same:

1. Leasing remains more flexible than owning, since you don't have to worry about selling an asset when you are done with it.

2. Leasing frequently transfers responsibilities for capital expenditures on the building to the landlord, reducing costs.

3. Leasing typically has a lower up-front cost than buying

4. Most, if not all, of lease payments will be tax-deductible.

If leasing makes business sense for your business, it will likely continue to make business sense after the final FASB changes get announced. The key impact of the change will be to make leasing as a tool for off-balance sheet financing less attractive. Another possible impact could be a movement towards shorter leases in an attempt to make the leases look more like leases and less like financing. However, for most businesses the real estate decision will still trump the accounting decision when choosing between leasing and buying space.