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FASB/IASB Issue New Lease Accounting Standards

IASB issued it's new lease accounting standard on January 13, 2016; FASB issued it's new standard on February 25, 2016

What's New?

In April 2016, CBRE and PwC held a joint webcast entitled “New Lease Accounting Standards and the Potential Impact on your Company and Real Estate Strategies”. This insightful webcast presented by subject matter experts from both CBRE and PwC focused on three primary areas of the upcoming changes that will impact virtually every company to some degree: 1) Overview of the new standards 2) What companies can be doing now to prepare for the changes 3) How might the new standards affect a company’s real estate strategies

To access the recording of the webcast (both audio and video) please click here and the presentation deck from the webcast can be downloaded by clicking here.

On February 29, 2016, CBRE’s Task Force on Lease Accounting issued a white paper reviewing the impact the new accounting standards will have on the go-forward real estate strategies of lessees. Whether it is a lease vs. own decision or the monetization of an asset by means of a sale/leaseback, companies will now want to know the financial impact of a real estate transaction on their balance sheet before making a decision. Understanding the nuances of the new standards, as well as possible unintended consequences, is important for all companies given the new environment that will soon exist where virtually all leases are capitalized.

The New Lease Accounting Standards Are Issued: What Real Estate Strategies Should Lessees Consider?

In January 2016, CBRE’s Task Force on Lease Accounting issued a detailed review of the IASB’s newly issued standard, as well as the key components of the soon to be issued FASB standard. Written in a Frequently Asked Questions (FAQ) format, this in-depth review from the lessee perspective allows one to quickly understand the details of the new standards, as well as know the key differences between each of the standards.

IASB Issues New Lease Accounting Standard: FASB Is Not Far Behind
(Really, we are not crying wolf!)

The FASB will be issuing their new leasing standard in Q1 2016.  Read this article from the FASB on what lessees can be doing in advance to be ready for the new standard.

Preparing for the Leasing Standard: What a Lessee Needs to Know

There are several steps companies can still undertake prior to the issuance of the new standard in Q1 2016 to avoid being caught flat-footed once the Standard is issued.  Please read this excerpt from CBRE’s Global Viewpoint White Paper for further insight into this topic.

Changes To Lease Accounting Are Coming: What Companies Should Be Doing NOW

Changes to Lease Accounting

In August 2010, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), collectively the “Boards,” issued the Original Exposure Draft (OED) for the “Leases” project. A proposal requiring all leases to be capitalized (i.e., on balance sheet). Just shy of three years after issuing the OED, the Boards issued the Revised Exposure Draft (RED) in May 2013, which represented the culmination of the Boards’ deliberations after receiving 800 comment letters and holding numerous joint working group meetings, public roundtables, workshops, webcasts and other outreach activities related to the OED. While the RED addressed some of the concerns arising from the OED, it still drew an additional 600 comment letters voicing continued concerns over its complexity and burdensome requirements.

Now, almost three years after issuing the RED and over five and one-half years after issuing the OED, the "leases" initiative is a reality. The IASB issued their standard (IFRS 16) on January 13, 2016 and the FASB issued it's new standard (ASC 842) on February 25, 2016. The IASB's effective date is 2019, while the FASB's effective dates are 2019 for public companies and 2020 for non-public companies. In the case of both standards, companies will have the ability to "early adopt" the new standard.

The Boards have agreed on the primary objective of requiring lessees to record the liability associated with leases "on balance sheet". Unfortunately, there were several areas where they were unable to reach agreement. As a result, a uniform global lease accounting standard has not been achieved and each board is issuing its own standard.

As these new standards will have a significant impact on companies who follow U.S. GAAP and/or IFRS, we encourage you to gain an understanding of this topic. The technical updates and thought leadership papers published by CBRE's Global Task Force on Lease Accounting will allow you to understand in greater detail the technical requirements of the new standards, as well as the financial impact and strategic implications of this broad array of changes facing the real estate industry.

Key Dates

As has been the case for five years now, CBRE’s Task Force will continue to keep you posted as this epic project progresses towards the finish line.

Additional Information

FASB Votes To Proceed With Final Standard On Leases (November 2015)

WSJ: "A Sure Fire Way To Harm The Economy" (November 2014)

EY: "Boards Make Progress on Leases Project" (April 2014)

Journal of Accountancy Article: Leases - What Should Companies Do Now?

Previous White Papers

July 2015:
Proposed Changes to Lease Accounting:
Is That The Finish Line…Or Is It A Mirage?

September 2014:
To Converge or Not to Converge...That is the Question!

March 2014:
Lease Accounting Update: Let The Redeliberations Begin!

June 2013:
CBRE Global Viewpoint White Paper

June 2013:
CBRE Global Viewpoint Whitepaper FAQ’s

June 2013:
Joint Webcast with PwC Addressing Proposed Changes to Lease Accounting

June 2013:
Revised Exposure ​Draft on Lease Accounting Issued: Back on the Front Burner

May 2013:
Revi​sed Exposure Draft on Lease Accounting Issued: Here we go again!

March 2013:
Lease Accounting update: Back to the Front Burner?​

November 2012:
Another Delay for the Lease A​ccounting Project

July 2012:
Accounting Boards Agree to Compromise

April 2012:
Accounting Boards at Odds = More Delays!​

November 2011:
Revised Proposal Delayed, Lessors Catch a Break and Lessees May Now Argue for Same

July 2011:
FASB/IASB Will Solicit Additional Comments on the Revised Lease Accounting

June 2011:
The Accounting Boards Keep Moving the Target. FASB and IASB Make Another Change.

April 2011:
Comments heard loud and clear - Boards considering revisions.

CBRE's Comment Letters

CBRE submits comment letters to the FASB/IASB in response to the Original and Revised Exposure Drafts:

CBRE Leases 2013 Comment Letter

CBRE Leases 2010 Comment Letter

Exerpts from CBRE's 2010 Comment Letter

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Global Task Force

Jeff Beatty
Jeff Beatty
Senior Managi​ng Director
+1 602 7355608
Judy Kinney
Senior Compliance Controller
+1 612 2424207
Mike Nelson
Mike Nelson
Senior Managing Director
+1 213 6133214
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Jennifer Pazzia
Senior Vice President
+1 310 6065036
+1 310 6065024
Kyle Redfearn
Kyle Redfearn
Managing Director
+1 214 9795686
Jeff Shell
Jeff Shell
Executive Vice President
+1 313 4172100
Amie Sweeney
Amie Sweeney
Vice President
+1 313 4172100
Nick Tansey
Senior Vice President
+1 901 6203100
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Bridgette Radford
Director, Portfolio Services
+44 20 7182 2000
+44 7590 485 297
+44 20 7182 39
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Bryan Altendorf
Senior Finance Manager
+1 901 2487225
+1 901 3590820
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Brooke Gary
Senior Lease Administration Manager
+1 901 6203198
+1 901 4122906
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Marc Kutler
Regional Finance Director
+1 214 8633258
+1 214 4150784
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Lisa Weaver
Sequentra Product Manager
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Michelle Stewart
Senior Real Estate Controller
+1 901 6203058