The Great FASB/IASB Lease Accounting Debate Rages On

Nancy Johnson Sanquist's picture

In a classroom in the Museum of London normally occupied by students waiting to be enlightened on the history of the this great city, sat real estate professionals attending the Manhattan CONNECTIONS User Conference last week. They were gathered to hear what Trimble is doing regarding the seemingly never ending debate on what will finally appear (hopefully at the end of this year) in the FASB and IASB lease accounting standards newly revised requirements. This debate has been raging since 2006 with discussion papers and exposure drafts offered for comments from all the affected stakeholders (commercial real estate, large multi-nationals, small businesses, industry organizations etc. submitting hundreds of comments after each draft). 

As most of us know by now, the new lease accounting standard proposed by FASB (although the whole project started with FASB and IASB trying to agree on the same standard that did not happen) changes the rules governing real estate and equipment leases. Companies would be required, under the new rules, to recognize the assets and liabilities of leases for over a 12 month period based on the present value of lease payments.

To prepare companies for these changes, Trimble is offering a webinar entitled "FASB/IASB Reality Check: How Trimble Can Enable You to be Ready for Lease Accounting Changes" on Wednesday, 15 July, at 11:00am EDT, presented by Gene Lee and Nicki Taljaard. If you are responsible for your organization’s lease portfolio, I do not think you can afford to miss this webinar which is based on presentations made at both the North American and European Manhattan Connections conferences this year. Why you might ask should you take the time to attend the webinar? The reasons are compelling we believe, such as:

  • There may be more of an impact than you expect for your organization. There will most likely be significant impact on a company’s financial reporting with impact to the balance sheet. It could impact the Debt to Equity ratio, as well as the Return on Assets (ROA) percentage.
  • Few companies today are prepared to comply and still have manual lease administration or spreadsheets. Many companies have hundreds or thousands of leases currently accounted for in multiple complex spreadsheets which represents non-efficient real estate management processes and inaccurate reporting. With an Integrated Workplace Management Solution lease administration takes the burden away from transactional work and allows time for more strategic decision making regarding renewal options and lease terms.
  • There is little progress evidenced to date on readiness for implementation. When Deloitte queried real estate executives a year ago, only 1% of them were extremely or very well prepared to comply with the proposed standard and I would imagine that percentage has grown only a few percentage points today if they were surveyed again. However, in the same survey, half of the respondents felt that it would take at least one year to implement new processes and tools.
  • There is beginning to be more of a concern over what technology solutions can supply the right lease data. And therefore, the time to watch this webinar to understand how Trimble can benefit your implementation strategy. You will be able to:
    • Prepare for these changes so you are ready to meet the new deadlines with full transparency of your accounting procedures for leasing on all of your properties and assets around the world.
    • Ensure cost effective operations which adhere to any regulatory compliance required by the federal government.
    • Transition from reactive to proactive portfolio management practices.

And tune back to this blog in December of this year for hopefully an announcement final release of the new standards.

 

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