How Much of the $2 Trillion Dollars of Leases Will FASB Shift to Your Company's Balance Sheet?

Nancy Johnson Sanquist's picture

Finally, we are closer to the final countdown for changes in the US and international lease accounting standards. On Wednesday of last week the Financial Accounting Standards Board (FASB) gave us an idea of the timing of the final version of the regulations to be issued in the early part of next year. For public businesses, these changes will likely go into effect in Q1 2016, and for private companies, one year later. However, for all of you eagerly-awaiting lease administrators, early adoption will be permitted any time before those dates.

As most of you know, as we have been talking about this for years. This major accounting change will put an end to the concept of operating leases and will gross up balance sheets with a lease liability and a right to use asset. The gross-up calculation could include estimates of all base rents, rent escalations, renewal options and other expected payments.  And this change not only applies to real estate, but airplanes, trucks, trains, copiers, computers or any other asset you may lease.

For those of you who thought that FASB and IASB would never finalize their deliberations on the regulations, you can now expect your CEO and/or CFO to knock on your door for a serious discussion about how well you are prepared to respond to these financial changes. If you are still working with Excel, it is time to call your Trimble salesperson and get a demo of how the Manhattan IWMS can help you prepare your lease portfolio for this historical shift. Manhattan was designed for not only occupiers of real estate, but owners so it has the most sophisticated accounting features. This includes  a sub-ledger for all the detail you will need for these new reporting requirements – something that ERPs lack. 

Perhaps you have questions about both FASB and IASB. I would direct you to our in-house accounting expert, Gene Lee (gene_lee@trimble.com) who can discuss these changes in the simplest language possible and direct you to an informative Trimble webinar that may clear up some difficult concepts. So now it is getting closer, find out how we can help you prepare for that anticipated C-level conversation. It will happen sooner than you think.

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