FASB Lease Accounting Changes – Be Prepared!
12/22/2011 11:52 AM
Submitted by A. Smith
The Financial Accounting Standards Board (FASB), in conjunction with the International Accounting Standards Board (IASB) has indicated that they will be publishing new lease accounting standards in 2012. At the core of the accounting changes is the idea that operating leases should be accounted for on a company’s balance sheet, as opposed to solely being expensed on their income statement. The new standards that will expand upon this idea are expected to go into affect sometime in 2014.
In anticipation of the new standards, companies are assembling taskforces to spearhead their preparation for and adaptation of the changes that will come. The types of questions these groups will be trying to answer in order to make informed business decisions for the future are things like:
- How will our accounting process need to change?
- What will the impact of these lease accounting changes be on our financial statements?
- How will these changes affect our business?
- How can we best prepare for these changes?
The taskforce assembled to answer these questions should include your financial managers; people like your accountant, your CFO, your Controller and your VP or Director of Real Estate. If you do not have a VP or Director of Real Estate, you may want to consider engaging the services of an experienced Real Estate Consultant. A consultant who specializes in analyzing real estate transactions could review the company’s current real estate commitments, whether owned or leased, and they could help the team better understand how the anticipated lease accounting changes would impact such a large piece of the company’s financial puzzle. As a member of the taskforce the real estate consultant would also be positioned to help develop real estate strategies that would deliver more favorable short term or long term financial outcomes for the company under these new accounting standards.
There were many questions and concerns voiced after the most recent draft of FASB’s revised standards, so companies will need to hold off on arriving at any definitive conclusions until the final draft has been published. However, if your company has not already started, this is an ideal time to begin understanding the proposed changes and forming the taskforce that will help address them.
With the holidays upon us and 2012 right around the corner, it is also the time to start thinking about New Years Resolutions. I have already decided what mine is ...To be prepared!
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