Lease Accounting Changes |
The Internal Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) released new global lease accounting standards in Q1 2016. These two Boards, respectively, govern the International Financial Reporting Standards (IFRS) and the United States Generally Accepted Accounting Principles (US GAAP). The changes in the lease accounting standards have huge implications for all companies with leases and those that file financial statements as leases will become a key feature on company balance sheets. |
The Change |
OLD BALANCE SHEET |
NEW BALANCE SHEET |
Increase Transparency |
All leases will now be on the balance sheet. |
The Impact |
Did you know...? |
Profit & loss analysis will be significantly different from today |
Key financial metrics such as EBITDA, ROA and Debt-Equity ratio reported by companies will be impacted |
Significant administrative and reporting requirements |
1 in 2 companies using IFRS or US GAAP will be affected by the lease accounting changes |
of lease commitments currently do not appear on the company’s balance sheet |
There are US$2.18 trillion lease commitments of listed companies around the world |
The Journey |
Exposure draft |
Final standards released in Q1 2016 |
Effective date of new standard: Jan 2019 |
Two year look-back period |
Revised Exposure Draft |
2010 |
2013 |
2016 |
2017 |
2019 |
Accounting for leases |
Determine if contract is a lease |
Determine the lease accounting model |
Determine lease term to be included |
Calculate capitalized lease obligations |
Disclose required information in financial statements |
Hot Topics |
SUB LEASES |
SALE & LEASEBACK |
LEASE VS OWN |
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JLL Does Not Provide Accounting Advice - JLL is not an accounting firm and does not provide accounting advice. You should seek the advice of your own accountant when considering tax issues, interpretation of accounting standards or other matters with accounting ramifications, including the information discussed in this infographics. |
For more information on the lease accounting changes: http://interact.jll.com/lease-accounting-changes http://leaseaccountingchanges.com |
Plan |
Implement |
Maintain |
Strategy |
Operations |
Collect data D1 impact | Review / Modify technology | Assess impact | Design reporting |
Define roles | Develop processes | Modify BU metrics | Align resources |
Technology / Data |
Modify lease terms | Financing arrangements |
2019+ |
2017 |
Now |
Getting Ready |