Today, you don’t need to report your leases on your balance sheet. That’s about to change — radically. Under new accounting rules now being considered, not only will your lease values need to be included in your financial statements, but the consequences could be felt throughout your whole company. The time to start preparing is now — before you sign your next lease.
At Cresa, we’ve been studying the proposed FASB changes intently, and we’re up to speed both on how they work and what their likely impact will be. Since we only represent tenants, we are particularly well-suited to give you unbiased advice about the crucial decisions you’ll need to make.
Full implementation of accounting rule changes will be in 2019 and there is no time to lose. Your 2017 and 2018 financial statements will need to be restated to reflect the new rules. And since most leases are five or more years in length, the impact is likely to be immediate. Your entire corporate real estate strategy could well be affected.
You can expect your leases to inflate your balance sheet considerably, which may make long-term leases significantly less attractive. Depending on your situation, you may decide to shed current leases and consider owning properties instead. You’ll need to look at every space in terms of how long you need to occupy and what makes sense, from both a financial and a business standpoint.
But strategic questions aside, there will be no shortage of administrative issues to deal with — and the sooner the better. Your reporting requirements will be increasing dramatically. Each current lease will need rethinking. Each new lease will come with its own complex set of calculations that will change from year to year. Databases will need to be upgraded. Relocations will need to be considered.
In other words, the change doesn’t just affect your real estate department, though those people will be plenty busy. It affects your financial organization, your IT people, and HR as well. The new demands might well outstrip your ability to handle them.
That’s where we come in. Not only do we thoroughly understand the issues, but we have the resources and the expertise to help you make — and implement — the right decisions. But there’s no time to lose. The lease you sign today could look very different in five years. Let us show you what you can do to prepare.