{"id":118909,"date":"2019-04-16T01:45:08","date_gmt":"2019-04-16T01:45:08","guid":{"rendered":"https:\/\/www.bnreport.com\/top-ten-considerations-for-new-leasing-standard\/"},"modified":"2019-04-16T01:45:08","modified_gmt":"2019-04-16T01:45:08","slug":"top-ten-considerations-for-new-leasing-standard","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/top-ten-considerations-for-new-leasing-standard\/","title":{"rendered":"Top Ten Considerations For New Leasing Standard"},"content":{"rendered":"<p><img decoding=\"async\" src=\"http:\/\/www.cityam.com\/assets\/uploads\/main-image\/full_width_article_body_image\/gold-standard-3268698-5cb43e1a42d0c.jpg\"\/><\/p>\n<p>At long last, a companys lease obligations \u2013 formerly buried in the back of the footnotes of the financial statements \u2013 are moving front and centre onto the balance sheet, as a new leasing standard goes into effect for both US GAAP and IFRS companies effective 1 January 2019. Thats just around the corner as the first quarter and half yearly results are set to be published in short order.<\/p>\n<p>Whats changing? The short answer is that previously invisible leverage from leasing activities will now become visible, as all lease obligations will be presented as a liability on the balance sheet, offset by a \u201cright of use asset,\u201d representing the right to use the leased asset. Every company globally must recognise their lease obligations on the balance sheet. The size of the impact will depend on the nature of a companys leasing arrangements.<\/p>\n<p>CFA Institute has long advocated for recognition of lease obligations on the balance sheet because investors have been estimating and adjusting for this liability for decades. And, while the measurement methodology does not incorporate our preferred method of reflecting current market conditions, we generally view this change in accounting as a development that reflects how investors assess this leverage.<\/p>\n<p>CFA Institute, like many others, have worked with standard setters on this new rule for the last decade. Because US GAAP and IFRS have decided on different solutions and transition methods, investors need to carefully consider the impacts of the new standards on the companies in which they invest. We thought it was important to help investors navigate the changes ahead. To that end, we have prepared a guide to help investors understand the change they are about to witness. Our paper, <a href=\"https:\/\/www.cfainstitute.org\/advocacy\/policy-positions\/leases-what-investors-need-to-know\" rel=\"noreferrer noopener\" target=\"_blank\"><em>Leases What Investors Need to Know About the New Standard<\/em><\/a><em>, <\/em>provides the top ten considerations for investors as they evaluate the impact of the change to the new standard. Because the most significant change \u2013 and the greatest comparability challenges arise from lessee accounting, which has a broader impact for investors, this report focuses only on lessee accounting.<\/p>\n<p>We have focused on top 10 considerations including:<\/p>\n<ol>\n<li><strong>The Basics <\/strong>\u2013 Helping investors understand the basics of the new US GAAP and IFRS standards and their differences.<\/li>\n<li><strong>Transition Methods <\/strong>\u2013 Explaining the methods and implications of transitioning to the new standards under US GAAP and IFRS \u2013 as well as the comparability challenge brought about by the differing methods.<\/li>\n<li><strong>Transition Impact Disclosures <\/strong>\u2013 The transition disclosures to expect, some examples to illustrate, and how investors should evaluate the transition impact.<\/li>\n<li><strong>Financial Statement Captions <\/strong>\u2013 The implications, and differences, of the new US GAAP and IFRS standard on financial statement captions. Including a quick illustration for those analytically inclined to visualise the effects and differences of the new standard on the income statement.<\/li>\n<li><strong>Non-GAAP Measures <\/strong>\u2013 The implications of the different US GAAP and IFRS treatment of leases on the most notable non-GAAP measures. Most importantly, alerting investors to the fact that net income will likely be lower for IFRS companies while measures of operating income such as EBITDA and EBIT will be higher than the past and relative to US GAAP companies.<\/li>\n<li><strong>Cash <\/strong>\u2013 Explaining how cash doesnt change, but the statement of cash flows will change, for IFRS companies.<\/li>\n<li><strong>Ratios <\/strong>\u2013 An analysis of the implications, and differences,<a href=\"http:\/\/www.cityam.com\/276193\/top-ten-considerations-investors-surrounding-new-leasing\" rel=\"noreferrer noopener\" target=\"_blank\"><strong>Read More \u2013 Source<\/strong><\/a><br \/>\n[contf]<br \/>\n[contfnew]<br \/>\n        <img decoding=\"async\" src=\"https:\/\/loopup.com\/app\/uploads\/2016\/08\/cityam-logo.jpeg\"\/><\/p>\n<h5><a href=\"http:\/\/www.cityam.com\/\" rel=\"noreferrer noopener\" target=\"_blank\">CityAM<\/a><\/h5>\n<p>[contfnewc]<br \/>\n[contfnewc]\n<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>At long last, a companys lease obligations \u2013 formerly buried in the back of the footnotes of the fin..<\/p>\n","protected":false},"author":1,"featured_media":118910,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[],"class_list":["post-118909","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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