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New Lease Accounting Rules Prompt Leasing Strategy Questions

New lease accounting standards go into effect in 2019, moving real estate liabilities onto lessees’ balance sheets. While little will change on landlords’ books, the new rules are triggering leasing strategy changes that will spark tenant demands for improved transparency in their lease agreements.

Most lease commitments don’t show up on corporate balance sheets today. Going forward, any equipment or real estate lease with a term longer than 12 months must be recorded on the balance sheet as a “right-of-use” asset with a corresponding lease liability under new rules established by both the International Accounting Standards Board and the Financial Accounting Standards Board. In other words, the new standards affect most large companies.

While the standards don’t go into effect for more than a year, public company filings will need to include comparable information for 2017 and 2018. Private companies will need to include a one-year look-back. In both cases, lessees must begin to institute changes now to prepare for new reporting processes and collect the necessary leasing data now.

Read more about the new standards and the implications for the commercial real estate industry in BOMA Magazine

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