Get Prepared Now for the Anticipated FASB Lease Accounting Changes

Do you have a sense for the magnitude of the changes being discussed by the Financial Accounting Standards Board (“FASB”) related to lease accounting? While a great deal of uncertainty remains around the ultimate outcome of the new policies, one thing is certain:  being ready for the inevitable change is just good business. And that means making sure your lease management house is in order - before the changes hit.

Read the Chain Store Age article by Virtual Premise President and COO, Andy Thomas

You Can't Avoid FASB Changes Forever
Two things you can do now to prepare for the financial impact to your balance sheets

These expected regulatory changes will have a significant impact on all companies’ balance sheets and the level of auditable work that will need to be completed (and maintained) by reporting companies. The anticipated lease accounting changes may mean that all long-term leases (including not only real estate, but leases for fleets of vehicles, office equipment, manufacturing equipment, computers and IT equipment, etc.) must be included in the balance sheets. This results in the need for leases to be recognized on the books as an asset, representing the right to use the asset, and as a liability, representing the obligation to pay the lessor. A critical yet often overlooked ramification, if these changes become reality, is that companies will need to restate their past years’ financial information so that financial statements reflect accurate comparisons. That means a staggering amount of work companies must do even well before the proposed transition date.

While many in the real estate industry are dreading the upcoming changes - and all the work involved - others are excited at what they recognize as an opportunity. Savvy real estate professionals will drive the new lease accounting processes, and offer strategic recommendations to their company executive team - assuming a more visible, strategic role in the financial management of their companies.

Here are some questions you should be asking now to get prepared for the transition:

• Do we have dependable, complete data for all our leases – real estate and non-real estate leases?
• Do we have resources in place to handle the transition project workload?
• Do we fully understand the impact on financial reporting?
• Are we ready to defend our financial statements for SOX compliance and to pass audits?
• Are we ready to restate our financial information for several past years so that our financial statements reflect accurate comparisons?