Helping with Changes in
Lease Accounting and Reporting
Fell provides customized solutions to our clients by addressing rent payment services in a variety of methods:
In 2016, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued new accounting standards that affect how companies will report on their obligations for leased assets. The change affects all assets covered by a lease agreement, whether they are real estate assets or equipment assets. Everything from office space to copy machines must be accounted for at an asset level except in very limited circumstances.
The new accounting standards take effect for fiscal years beginning after December 15, 2018 for public companies and one year thereafter for private companies. However, for organizations that issue comparative financial statements the reporting standard must be consistently applied to the lookback period. This means that for some organizations, the comparative period may begin in late 2016 or early 2017.
The overreaching objective of the new accounting standard is for greater reporting transparency with regards to lease obligations. The most visible result of this accounting change is that new assets and liabilities will be reflected on a company’s financial statements. What previously were straight-line rent expenses that appeared on the income statement will now be reflected as assets, liabilities and expenses on both the balance sheet and income statement, shown at present value with interest factored in.
Create your project team now and begin work towards compliance. Include all functions that touch leasing – from procurement to finance to operations to real estate. Don’t forget to include outside resources that you might need to provide manpower, guidance and technical support to bolster your team.
Consider the makeup of your leased assets. Some portfolios contain primarily real estate assets. Some may be heavy into fleet, railcar, technology or other equipment. Each will have unique challenges that require unique solutions.
Fell Lease Administration can help you navigate this complex change and create a customized solution that works best for you. Whether you need assistance evaluating potential software solutions, gathering and entering data or abstracting leases, we are your ideal project partner. Contact us to learn more.