Since the announcement by FASB and IFRS last August of the proposed major lease accounting changes, there has been a surge of manuals, blog posts, podcasts, videos and papers released on the subject. Each provide a plethora of information, useful on the one hand, overwhelming on the other. The key message that is circulating throughout the property industry in both the UK and the USA is that the changes will impact businesses both financially, (for example, impact to debt covenants), and administratively. Through my efforts of trying to remain cognisant with this complex topic, I have concluded two things.
1. Keep up to date
Access to information about the changes, what they mean for the lessee/ lessor, and what can be done to prepare for them can be sourced widely. I have found the sources below to be particularly helpful.
- The FASB website – regularly check it for official updates and the implementation date.
- KBA Lease Services, an American firm, releases regular, informative and simple insights to the changes and how to prepare prior to the implementation. Check out their corporate real estate blog.
- Jones Lang LaSalle’s Lease Accounting Changes Blog or their dedicated webpage. Jones Lang LaSalle release regular posts on amendments to the changes and provide an ask the expert service.
2. Be prepared
Discuss how you will prepare for the changes with your team, brainstorm, exchange ideas and create an action plan. I recently joined an informative Twitter chat forum on Friday evenings. This is a regular fixture for a group of corporate real estate professionals who twilight as Twitter enthusiasts, to discuss industry news and issues. The lease accounting changes were the subject of choice last Friday (17th June). You can search and join these discussions using the hash tag #CREchat, or visit the website.
Initial preparation could include the following:
- Ensure you and your team collects all the information and documentation for each lease. This will take a good deal of time to organise, dependent upon the number of leases in your portfolio.
- Ensure those on your team understand the changes and what it will mean for the day to day accounting.
- Discuss company accounts with your auditors to understand problem areas specific to your company.
What can Legacy do to help you?
Offload your surplus leases to Legacy at this uncertain time, enabling your property team to focus on meeting the standards of the lease accounting changes for your core portfolio. If you would like more specific information about the Legacy solution to your surplus property, please follow this link, or contact us.