|By PR Newswire||
|August 6, 2014 07:00 AM EDT||
HOUSTON, Aug. 6, 2014 /PRNewswire/ -- While lease accounting standards have been under review for a number of years, it is imperative that businesses start preparing now for the coming changes, according to the third quarter edition of "Ask the Expert," featuring Mike McLain, Transwestern's chief accounting officer. In this edition, McLain explains where the proposed changes stemmed from, outlines three proposed changes and advises businesses on actions they should take now in preparation for the imminent changes.
The need for new accounting standards stemmed from two primary reasons: a desire for greater transparency in financial reporting and the importance of universal reporting standards as commercial real estate becomes a more global industry. Categorizing leases longer than 12 months as a financing transaction allows interested parties, such as lenders, to evaluate all of a company's liabilities.
Most real estate leases are considered "Type B" leases, meaning the lease doesn't consume a significant portion of the asset's useful life or the rental payments do not amount to a substantial portion of the fair value of the asset. This is the biggest divergence between standard setters, with the FASB in favor of separate treatment and the international board favoring one set of rules for all leases.
For Type B leases, the value of the "right-of-use" asset and corresponding liability would be calculated based on the present value of expected future lease payments. Present value takes into consideration future lease options, lease incentives, variable lease payments and other cash flow impact lease terms.
The lease expense for Type B leases would be treated as a single line item on the income statement and recognized straight-line over the lease term. The right-of-use asset and corresponding lease liability would be "amortized" using the effective interest method, not straight-line.
In the best case scenario with final approval by the end of the year, balance sheets would likely be impacted in 2018. To prepare for the coming changes, companies should begin taking into consideration how lenders will view this information when the debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio changes. They should ask if additional debt on the balance sheet will make it more difficult to borrow money or otherwise affect financing arrangements. These changes will also require additional record-keeping capabilities. Occupiers may even consider self-funding tenant improvements in favor of shorter lease terms or lower rental rates.
"Ask the Expert" is a Q&A with Transwestern experts and leaders. Download the full version at twurls.com/ate-mclain.
Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 181 offices in 40 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. For more information, please visit transwestern.com and follow us on Twitter: @Transwestern.
The age of Digital Disruption is evolving into the next era – Digital Cohesion, an age in which applications securely self-assemble and deliver predictive services that continuously adapt to user behavior. Information from devices, sensors and applications around us will drive services seamlessly across mobile and fixed devices/infrastructure. This evolution is happening now in software defined services and secure networking. Four key drivers – Performance, Economics, Interoperability and Trust ...
May. 1, 2017 02:15 AM EDT Reads: 1,188
All organizations that did not originate this moment have a pre-existing culture as well as legacy technology and processes that can be more or less amenable to DevOps implementation. That organizational culture is influenced by the personalities and management styles of Executive Management, the wider culture in which the organization is situated, and the personalities of key team members at all levels of the organization. This culture and entrenched interests usually throw a wrench in the work...
May. 1, 2017 01:45 AM EDT Reads: 1,110
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
May. 1, 2017 01:15 AM EDT Reads: 1,454
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
May. 1, 2017 12:30 AM EDT Reads: 1,289
SYS-CON Events announced today that CollabNet, a global leader in enterprise software development, release automation and DevOps solutions, will be a Bronze Sponsor of SYS-CON's 20th International Cloud Expo®, taking place from June 6-8, 2017, at the Javits Center in New York City, NY. CollabNet offers a broad range of solutions with the mission of helping modern organizations deliver quality software at speed. The company’s latest innovation, the DevOps Lifecycle Manager (DLM), supports Value S...
May. 1, 2017 12:15 AM EDT Reads: 1,555
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
May. 1, 2017 12:00 AM EDT Reads: 1,293
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
May. 1, 2017 12:00 AM EDT Reads: 1,211
Multiple data types are pouring into IoT deployments. Data is coming in small packages as well as enormous files and data streams of many sizes. Widespread use of mobile devices adds to the total. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will look at the tools and environments that are being put to use in IoT deployments, as well as the team skills a modern enterprise IT shop needs to keep things running, get a handle on all this data, and deli...
Apr. 30, 2017 11:45 PM EDT Reads: 2,866
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Apr. 30, 2017 11:00 PM EDT Reads: 1,944
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound e...
Apr. 30, 2017 10:45 PM EDT Reads: 2,632
Automation is enabling enterprises to design, deploy, and manage more complex, hybrid cloud environments. Yet the people who manage these environments must be trained in and understanding these environments better than ever before. A new era of analytics and cognitive computing is adding intelligence, but also more complexity, to these cloud environments. How smart is your cloud? How smart should it be? In this power panel at 20th Cloud Expo, moderated by Conference Chair Roger Strukhoff, pane...
Apr. 30, 2017 10:30 PM EDT Reads: 2,653
Grape Up is a software company, specialized in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market across the USA and Europe, we work with a variety of customers from emerging startups to Fortune 1000 companies.
Apr. 30, 2017 10:00 PM EDT Reads: 2,690
SYS-CON Events announced today that Grape Up will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct. 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company specializing in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market across the U.S. and Europe, Grape Up works with a variety of customers from emergi...
Apr. 30, 2017 09:45 PM EDT Reads: 2,532
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
Apr. 30, 2017 09:45 PM EDT Reads: 2,727
@ThingsExpo has been named the Most Influential ‘Smart Cities - IIoT' Account and @BigDataExpo has been named fourteenth by Right Relevance (RR), which provides curated information and intelligence on approximately 50,000 topics. In addition, Right Relevance provides an Insights offering that combines the above Topics and Influencers information with real time conversations to provide actionable intelligence with visualizations to enable decision making. The Insights service is applicable to eve...
Apr. 30, 2017 09:30 PM EDT Reads: 3,222