The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...
By Steven Marcy
Companies should think carefully about why and what they lease before trying to figure out how to comply with the new lease accounting standard that takes effect for public entities next Jan. 1.
Accounting departments should ask their company’s top officers to explain the strategic reasons for a leasing policy. This process will help the accounting department and chief financial officers better understand how to comply with the new leasing rule, panelists told a May 17 conference sponsored by Deloitte LLP and Bloomberg Tax on the challenges of adoption.
“Get your executives to be clear about why you lease and it will actually help you think about that future state” of leasing under the new rule, Reston, Va.,-based LeaseAccelerator Inc. CEO Michael Keeler told the conference. Getting clarity from top management about their leasing strategy will “help you manage the project” for complying with the new rule.
Companies tend to make leasing decisions based on whether leasing or ownership is the best way to maximize cash flow, Keeler said. That can require a decision whether “to put your money in appreciating assets rather than depreciating assets.”
“Start with the strategy” of the company, Keeler urged.
David Samuels, CFO of DrFirst Inc. in Rockville, Md., said that decisions about how and when to “refresh” technology and equipment probably will play a big role in how companies make leasing decisions. The new standard and how complex it will be to apply probably will influence whether to lease the equipment or employ a credit financing arrangement, he said.
Keeler and Samuels also suggested the new leasing standard might spur more leasing, not less, especially among those who launched their preparations early for the new standard.
They said that the early preparation can give companies a much greater sense of control over and knowledge of how leases actually affect company performance, making leaders of these companies more comfortable in making leasing decisions.
This deeper understanding of a lease’s potential impact gained from the early preparation can make executives more confident to lease an asset. It helps remove the dread that they might be over paying for the economic value of the asset, Keeler and Samuels said.
To contact the reporter on this story: Steven Marcy in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Copyright © 2018 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)