The long awaited, and greatly debated, changes to lease accounting standards under GAAP and IFRS are upon us. As CRE teams and their colleagues in corporate finance move toward implementing these new standards, many are surprised by the financial statement outcomes.
LeaseCalcs’ latest white paper, as published in Corporate Real Estate Journal, explains why two identical leases will yield very different accounting impacts for different companies, and – more importantly – how those differences affect balance sheet, shareholder equity, net income and EBITDA outcomes.
The paper discusses why despite the fact that the FASB’s and IASB’s stated intentions were to achieve consistency and transparency in lease accounting, neither objective was really achieved. CRE executives looking to make an impact with the C-Suite need to understand these nuances in order to adjust strategies going forward.
The forthcoming Part 2 of this paper will focus on steps CRE directors, their advisors and counterparts in finance can take to optimize various financial impacts in light of the new standards.