WASHINGTON, DC-Bill Bosco, a consultant for the Washington,DC-based Equipment Leasing and Finance Association and principal ofLeasing 101, provided the following primer on how the compromisewill impact commercial real estate, providing the boards continuealong this tract.
1. Lessees will capitalize all leases except for short-termleases, which can use the operating lease method and remainoff-balance sheet. The lessee will record rent expense as under thecurrent operating lease GAAP, which produces a straight-line costpattern.
The exception, generally applying only to leases of an entirebuilding or land, is to use current GAAP capital lease accountingif the lease term is for the major part of the economic life of theunderlying asset or the present value of the fixed-lease paymentsequals substantially all of the fair value of the underlying asset.Capital lease accounting produces a front-ended cost pattern.Lessees had been opposed to the front-end pattern, since they donot view rentals as having an interest component that causes thefront-ended pattern.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
*May exclude premium content
Already have an account?
Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.