accounting & finance leadership forum - keiter · 2017. 5. 11. · brief csc leasing overview...
TRANSCRIPT
Brief CSC Leasing Overview
Private, 25-year old, Richmond-based equipment leasing company
Specialize in leasing technology (“anything with a chip”), medical and other types of equipment, and furniture
Will originate $25-30 million in hardware leases in 2012, and work with all forms and sizes of companies
Only offer operating leases – no capital leases
Thank You Accounting Regulators
FASB and IASB are set to release the latest lease accounting “exposure draft” in Q4 2012
Still uncertainty about the terms and the potential impact of the new standard: Will terms such as “insignificant portion of…” or
“insignificant relative to…”change equipment lease terms
Will company balance sheets be meaningfully impacted?
How much time and money will be spent explaining the changes to investors and lenders?
Our Clients Lease Equipment To:
Avoid significant capital outlays Develop alternative sources of financing Avoid owning assets that have a high level of
technological obsolescence Maintain flexibility with regard to managing
equipment assets Minimize balance sheet exposure
How Might New Rules Change Lessor Behavior or Lease Terms?
Leases will still be offered – but the lease might not be labeled an operating or a capital lease
Lessors will still be able to structure the lease to suit their business model regardless of accounting standards
Lessors may be asked to provide more pricing information
Conclusion
The greater impact of the standard may be with small to medium-sized companies who do not have audited/reviewed financials and have not had to disclose lease details in financial notes
Companies who desire to use the latest technology or need alternative sources of capital will continue to lease
CSC will adjust to the new standards and will continue to offer competitive leasing solutions
Part of the CBRE affiliate network
David Wilkins Wood Thornton Senior Vice President Vice President 804.267.7238 804.267.7221 [email protected] [email protected]
July 12, 2012
Accounting & Finance Leadership Forum
Part of the CBRE affiliate network
Task Force on Lease Accounting Changes
CBRE Financial Consulting Group
Part of the CBRE affiliate network
• FASB & IASB agree to compromise • Front-Loaded Expense Approach
• Straight-Line Approach
• Exposure Draft re-issued by YE 2012
• New Standard issued late 2013 with 2016 (or 2017) effective date
• P&L impact should not be materially different for most leases
Highlights From Update
Part of the CBRE affiliate network
In The Following Areas: • Balance Sheet
• Systems
• Personnel/Physical Space
• Own vs. Lease
• Financial Metrics (competitors)
COMPANIES NEED TO DEVELOP
STRATEGIES SOONER THAN LATER!
Anticipated Impact
Part of the CBRE affiliate network
• All Leases to be capitalized • Maximum term 12 months – no change
• Straight-Line Approach – similar to current accounting requirements (most leases)
• Front-Loaded Approach – lease is a form of financing, if: • Lease term accounts for the major part of
the economic life of the underlying asset; or
• PV of fixed lease payments accounts for substantially all of the fair value of the asset.
• Similar ring to SFAS 13 “bright lines”
Balance Sheet
Part of the CBRE affiliate network
• Communication between Departments • Who hosts the leases (HR, CFO, Real
Estate Department)
• Personnel changes
• Abstracts of leases for quick data mining
• PV all leases at the beginning
• Assess lease administration process/system
Systems
Part of the CBRE affiliate network
• Shift in CRE Strategies • Office space per worker
• Telework
• Hoteling
• Workplace design advancements
• Technology advancements
• Paperless office
Personnel/Physical Space
Part of the CBRE affiliate network
• Align CRE with business strategy
• Single tenants consider ownership
• Long-term leases/ground leases
• Possibility of more condominium structures in multi-tenant buildings
• Sale-leaseback market
Own vs. Lease Analysis
Part of the CBRE affiliate network
Financial Metrics
• $1.3 Trillion impact to Balance Sheets
• Assimilation period with: • Bankers
• Accountants/Auditors
• Financial Analysts
• Your company vs. competitors
• Transition rules still in question • “go-live” 2016-1017
• Re-issue of historical years
Part of the CBRE affiliate network
IS THERE ANYTHING WE SHOULD BE DOING TODAY?
Part of the CBRE affiliate network
• Existing leases • Identify location & any missing documents
• Consider lease abstracts if none exist
• Assess capabilities of lease administration system
• Develop financial templates to properly determine amounts to be reported in financial statements (tracking effective borrowing rate)
• “Playbooks” – diagram & develop standardized procedures/forms for the exchange of information between key stakeholders
• Review existing debt covenants for clauses that exempt the impact of future changes to US GAAP
Proactive Measures
Part of the CBRE affiliate network
• Preliminarily assess in the financial statement impact to your company and industry peers
• Initiate discussions with external auditors
• Explore future CRE strategies • Importance of and reasons for negotiating options; renewal,
termination, etc.
• Evaluate lease vs. own
• Implementation or upgrade of lease administration system
GET YOUR PROCESSES IN
PLACE TODAY!
Proactive Measures
Part of the CBRE affiliate network
Professional Profile
David Wilkins With more than a decade of experience in the business, David is well versed in all aspects of commercial real estate offering comprehensive services for owners, occupiers and developers of real estate. David focuses on developing and implementing creative real estate strategies for a wide array of customers including national corporations, regional companies and locally owned businesses. David has experience as a single point-of-contact providing complete transaction management and consulting services for his customers. His commitment to the customer ensures smooth transition between project phases.
Part of the CBRE affiliate network
Professional Profile
Wood Thornton Mr. Thornton specializes in representation of office and industrial tenants and buyers. He partners with his clients to evaluate their space needs and to help them uncover opportunities for significant savings. Mr. Thornton’s clients range from companies with a single office seeking advice on an existing lease renewal to Fortune 100 companies seeking strategic consulting and real estate services for their operations. He is a member of CBRE’s Global Law Firm’s Practice Group which provides qualified solutions to the real estate issues facing law firms today. Mr. Thornton began his business career as a corporate attorney. He spent the last decade of his legal career with Troutman Sanders LLP, where he was a member of Troutman’s Mergers and Acquisitions and Business Venture Team. Mr. Thornton’s practice focused on mergers and acquisitions, corporate and partnership structuring, and private equity financings. In addition, his legal work included real estate development structuring and transactions, commercial leases, and investment sales.
Part of the CBRE affiliate network
About CBRE
Americas Business Activity 2011
Offices 195*
Employees 20,700**
Total Transaction Value Property Sales Value Property Leasing Value
$92.4 Billion $45 Billion
$46.8 Billion
Property & Corporate Facilities Under Management/Leasing 1.6 Billion SF
* includes affiliate offices ** excludes approximately 1,700 affiliate employees