News

Lease Accounting Change Makes EBITDA an Even Muddier Metric

By Amanda Iacone, Reporter at Bloomberg Tax | Originally posted on: news.bloombergtax.com

  • New lease accounting rules short-change comparability between international and U.S. companies
  • Data vendors, companies adjusting the universal metric for lease accounting

The corporate earnings measurement known as EBITDA stormed into popular use during the leverage buyout boom of the 1980s, as investors looked for a measure better than net income to figure out how much cash a company generated, and ultimately whether it could handle its debt.

In the decades since, it evolved into a tool for evaluating everything from credit strength to equity multiples even as it was derided as “earnings before expenses” and came under scrutiny at the Securities and Exchange Commission.

Now, sweeping changes to lease accounting rules instituted this year have delivered a blow to the relevance of earnings before taxes, depreciation and amortization as the metric has been used traditionally. Differences in methods used to calculate it already limited its usefulness, said Robert Schiffman, a Bloomberg Intelligence credit research analyst, “and these accounting issues just make it a little bit more imperfect.”

The new rules for lease accounting required companies to report all long-term leases on their balance sheets for the first time.

The trillions of dollars’ worth of operating leases for airplanes, retail space, and office equipment were long estimated by investors and ratings agencies. But the accounting change triggered a few surprises for investors because, while instituted as a step toward balance sheet honesty, it also impacted earnings for such companies as Ryder System Inc., Duke Realty Corp., and Darden Restaurants Inc.… Read More

News

FASB proposal to delay accounting standards could cause headaches for investors

By Michael Cohn of AccountingToday.com | Originally posted on: www.accountingtoday.com

Moody’s Investors Service is objecting to a proposal from the Financial Accounting Standards Board to delay the effective dates of its leases, hedging and credit loss standards for private companies and small public companies, saying it would reduce the comparability of financial statements of public and private companies for investor and delay IPOs and mergers.

At a meeting last month, FASB voted to defer the effective dates of four standards for private companies, nonprofits and smaller reporting companies: leases, hedging, credit losses (also known as CECL for the current expected credit loss model it uses) and long-duration insurance contracts such as life insurance (see FASB to propose delays in major accounting standards). FASB subsequently unveiled the formal proposals as proposed accounting standards updates this month (see FASB issues proposal to delay new accounting standards and FASB proposes to delay insurance accounting standard). FASB typically gives private companies an extra year to implement major new accounting standards after the effective date for public companies.

The proposals would give private companies and nonprofits at least two years beyond the effective date for larger public companies, as well as extend the effective date for smaller reporting companies (those with a public float of less than $250 million; or annual revenue of less than $100 million and either no public float or a public float of less than $700 million). FASB is proposing a new philosophy of staggering the effective dates for major standards between larger public companies and all other entities, including private companies, smaller public companies, not-for-profits and employee benefit plans.… Read More

News

GASB offers implementation guide on lease accounting

By Michael Cohn, Editor-in-chief of AccountingToday.com | Originally posted on: www.accountingtoday.com

The Governmental Accounting Standards Board has released questions and answers about the recent standard on accounting and financial reporting for leases by state and local governments.

Implementation Guide No. 2019-3, Leases, addresses a variety of questions about how to apply the provisions of GASB Statement No. 87, Leases, including scope and applicability; determining the term of a lease; determining if a lease qualifies for the short-term lease exception; and recognition, measurement and disclosure by lessees.

Other topics include recognition, measurement and disclosure by lessors; accounting for contracts with multiple components and contract combinations; accounting for modifications and terminations of leases, along with sale-leasebacks, lease-leasebacks and intra-entity leases.

The guidance is applicable to all state and local governments that follow U.S. GAAP when preparing their financial statements.

The guide is available for download at no charge. Printed copies will be available through the GASB Store in the weeks ahead.

News

FASB issues proposal to delay new standards

By Michael Cohn of AccountingToday.com | Originally posted on: www.accountingtoday.com

The Financial Accounting Standards Board issued a proposed accounting standards update that would grant private companies, not-for-profit organizations, and certain small public companies extra time to implement the new standards on current expected credit losses (also known as CECL), leases and hedging.

The proposal comes after FASB voted earlier this month to give private companies, nonprofits and smaller reporting companies an additional year to implement the standards (see FASB to propose delays in major accounting standards). Private companies and nonprofits normally get an extra year after public companies on the effective date for implementing major new standards, but the proposal would give them an extra two years.

In the proposed update, FASB outlines a new philosophy for the effective dates for major standards between larger public companies and all other entities, including private companies, smaller public companies, not-for-profits, and employee benefit plans. Under this philosophy, a major standard would first take effect for larger public companies, and then, for all other entities, FASB would consider requiring an effective date staggered at least two years later. Generally, it’s expected that early application would continue to be permitted for all entities.

The move comes in response to complaints from many companies and accountants about the dfficulties of implementing the new standards, especially so soon after implementation of the revenue recognition standard.

“Based on what we’ve learned from our stakeholders, including the Private Company Council and the Small Business Advisory Committee, private companies, not-for-profit organizations, and some small public companies would benefit from additional time to apply major standards,” said FASB Chairman Russell Golden in a statement.… Read More

AccountLease™ Articles, News

5 things you may not know about the lease standard

By Ane Ohm, LeaseCrunch  |  Originally posted on www.accountingtoday.com.

As with any accounting standard shift, the new lease standard (ASC 842) brings momentous changes to accounting processes and financial reporting. While the main differences are well-known, I’ve taken a particular interest in the smaller nuances that live within the new standard. (Yes, I’m an accounting nerd and I love learning about and discussing all things related to leases!)

In this article, I’m sharing five of those intricacies that you may not know about the new lease standard, but that are critical to making the transition.

1. Equity likely isn’t impacted

I recently got into an argument with a potential client about this one — not the best way to start out a new relationship! And I understand where he was coming from: When changes in an accounting standard impact assets or liabilities on the books, typically the difference flows through equity. In this situation, the new lease standard is unusual in that equity is most often not impacted for initial journal entries.

Here is the correct process to follow when transitioning leases from ASC 840 to ASC 842:

  1. Calculate your lease liability, which is the present value of all future lease payments after the initial application date.
  2. Remove existing lease balances, such as deferred rent. As you reverse these balances off the books, they should flow through the right-of-use asset, not through the equity balance as is common when implementing a new accounting standard.
  3. In most cases, the ROU asset is the lease liability, plus or minus the difference of those existing balances.
Read More
AccountLease™ Articles, News

Lease Accounting: A private company perspective

By Stephen G. Austin, CPA; Michael G. Fraunces, J.D.; and Alisia Scudder, CPA  | Originally posted on: www.journalofaccountancy.com

By now, most public companies in the United States have adopted the new lease accounting standards as required on Jan. 1, 2019. Companies with noncalendar fiscal year ends will adopt the new standards sometime over the next few months.

Moving the measurements of operating leases from the footnotes of GAAP financial statements under FASB ASC Topic 840, Leases, to the balance sheet as assets and liabilities under Topic 842, Leases, has not been a simple task for corporate America. Now, private companies and most not-for-profit organizations face the same task. Entities with more than a handful of leases may be in for a surprise as to the time and expense required to address the complexity of the transition and analyze the related accounting rules that must be considered. They may also be surprised with the effect on financial statements and, perhaps, loan covenants due to potential significant changes in debt and related ratios.

Here are some of the lessons learned from act one with the public companies:

Gathering documents is a chore

In many cases, document management systems for operating leases have been less than ideal and certainly not well organized to be “Topic 842-friendly.” In our work assisting a Fortune 100 company in its compliance with Topic 842, a major challenge was locating and organizing all the relevant documents for making the assessment. Our work included assessing, on the company’s behalf, thousands of its agreements to determine whether they constitute leases under the new standard.… Read More

News, Press Release

Swenson Advisors Welcomes Jim LoPresti to the AccountLease™ Team

For Immediate Release

Swenson Advisors is pleased to announce that Jim LoPresti has joined the firm as the Business Development Executive. Jim will focus primarily on expanding nationwide a comprehensive solution called AccountLease™, developed in conjunction with Cresa – San Diego, in order to assist public, private and not-for-profit business entities to adopt and comply with the new U.S. and international lease accounting standards that will significantly impact corporate balance sheets.

AccountLease™ is a new paradigm that brings together a team of CPAs, Commercial Real Estate Brokers, Lease Accounting Software Developers and Attorneys in a bundled service that provides a turnkey solution for the new lease accounting standards.

Jim has more than 40 years of experience in marketing business development and sales management in financial and professional services. His previous experience includes Director of Business Development for Price Waterhouse, Arthur Andersen and Moss Adams LLP in San Diego; Director in San Diego for a tax advisory firm that helped clients claim research and development tax credits; and Vice President for several local and regional banks. Jim started his career with the IBM Corporation-Office Products Division as a sales representative in Cleveland, Ohio and was then promoted to Business Planning Analyst at their Franklin Lakes, New Jersey headquarters before his move to San Diego as a Marketing Manager.

Jim received his MBA and Bachelor of Science degrees from Ohio State University. Jim has served on the boards of directors for the San Diego Chapter of the Association for Corporate Growth, the Corporate Finance Council, and the La Jolla Golden Triangle Rotary Club.… Read More

AccountLease™ Articles, News, Press Release

AccountLease™ selects LeaseCrunch® as software platform for healthcare engagements

AccountLease is a strategic alliance between CPA firm Swenson Advisors and Cresa San Diego

MILWAUKEE – LeaseCrunch, the only lease accounting software made by former CPA firm auditors for CPA firm auditors, today announced that AccountLease will use their software platform to serve clients. 

Swenson Advisors LLP and Cresa San Diego launched AccountLease as a comprehensive solution designed to address the new lease accounting standards, which require companies to record substantially all real estate, equipment leases, and leases embedded in service agreements as assets and liabilities on their balance sheets starting as early as 2019 for publicly traded companies.

“We are pleased to be working with AccountLease, helping their clients navigate the new lease accounting reporting requirements,” said Ane Ohm, Co-Founder and CEO of LeaseCrunch.

Steve Austin, Managing Partner at Swenson Advisors, has been at the forefront of the new lease standard and led one of the first new lease accounting implementations in 2017. “LeaseCrunch is designed to accommodate the needs of companies with large, complex portfolios, while still being a cost-effective solution for companies with as few as 1-5 leases, who most likely have an office lease material enough requiring full implementation,” said Austin. “AccountLease is implementing LeaseCrunch at a major health system that has over 4,000 leases in their portfolio and a big reason for that was LeaseCrunch’s ease-of-use.  This project joins several Integra International firms, led by KSDT in Miami to provide a comprehensive team of specialists.”

“LeaseCrunch wants to help CPA firms enhance client relationships by providing essential features and innovative solutions through a simple interface,” said Ohm.… Read More

Client Spotlight

Client Spotlight: Baptist Health

Baptist Health South Florida, Inc. (BHSF) is a not-for-profit Florida corporation located in Miami-Dade County, Florida. BHSF is the largest healthcare organization in the region, owning and controlling more than 350 properties, including 10 hospitals as well as outpatient, surgery and rehabilitation facilities, express and urgent care centers, diagnostic imaging and endoscopy centers, and sleep centers. BHSF has approximately 19,500 employees plus more than 3,500 physicians.

In 2016, the Financial Accounting Standards Board issued ASU 2016-02, Leases (Topic 842) to dramatically change accounting requirements for leases. In order to interpret, analyze and comply with the new reporting standards relative to its leases, BHSF engaged a team consisting of Swenson Advisors, KSDT & Co., a financial accounting and advisory firm in South Florida, and the commercial real estate firm Cresa, San Diego.

KSDT, Cresa and Swenson Advisors are very pleased to have the opportunity to support BHSF in this project and to be able to offer expert resources to streamline the process and facilitate BHSF’s achieving compliance with the new standards.

News, Press Release

Swenson Advisors Welcomes Joel C. Colbourn, MBA to the AccountLease™ Team

Joel Colbourn has joined Swenson Advisors as Lease Accounting Director based in our San Diego office.

Joel is a finance/treasury professional with more than 20 years of experience directing accounting and finance operations in global organizations. His experience covers various industries including aerospace and defense, technical services and solutions, technology, and consumer products.

Previously, Joel was a Consultant for Resources Global Professionals from 2015-2018. Prior to that, he served as VP & Treasury Director for Credit and Compliance Initiatives and as VP & Assistant Treasurer for Science Applications International Corporation (SAIC). Past experience also includes Assistant Treasurer for Teledyne, Inc., VP of Finance & Chief Financial Officer for Van de Kamp’s Holland Dutch Bakers, and Audit Manager/Senior Manager for Ernst & Whinney (now Ernst & Young).

Joel received his MBA in Accounting from the University of Southern California’s Marshall School of Business, BS in Finance and Accounting from the University of California, Berkeley and CPA from the State of California.