new fasb guidelines impact on leasing and cloud computing

New FASB Guidelines and Their Impact on Leasing and Cloud ComputingManaged Services May Provide an Off Balance Sheet Benefit

Thomas Vallone847-274-8154thomasdvallone@gmail.comtvallone@wintrust.com

FASB Guidelines

New lease accounting standards will increase on-balance sheet assets and liabilities

Takes effect late 2019

All assets will need to be capitalized

FASB Guidelines

FASB was intended to provide transparency of company financials

New rules/transparency may expose balance sheet costs that were previously ‘hidden’ as operational expense

> Added asset costs and liabilities will be disclosed> No corresponding change in equity> Stock prices could be negatively affected

(Corporations still desire off balance sheet treatment of equipment)

Business Challenges with FASB

Acquire IT assets via Cloud Computing / Managed Service Contracts

How to Satisfy Conflicting Agendas?

Cloud Computing /Managed Services

Examples:

Infrastructure-as-a-Service

Storage-as-a-Service

Desktop-as-a-Service

Audio-Visual-as-a-Service

Disaster-Recovery-as-a-Service

By employing cloud services, companies receive necessary equipment and off balance sheet treatment

Cloud solutions, by nature, are service contracts

Businesses are not required to recognize service contracts as assets and liabilities on their balance sheets and qualify as operational expenses

Corporations accustomed to expense equipment acquisitions on operating leases may now employ cloud solutions to keep assets off balance sheet

Cloud Solutions

Questions?

Thomas D ValloneClient advocate l Relationship builder lBusiness Strategisttvallone@wintrust.comthomasdvallone@gmail.comwww.linkedin.com/in/thomasdvallonewww.twitter.com/thomasdvallone847-274-8154