VIDEO: Lease accounting rule changes coming

Earlier this year, the nonprofit Financial Accounting Standard Board released new rules that will change the way leases are treated in financial documents. These new rules will increase reporting requirements and move currently off-balance-sheet lease obligations away from company income statements and back on to company balance sheets.

NAR’s Commercial Regulatory Policy Representative, Stephanie Spear, says the impact of this change will be seen mostly by accountants, rather than in day-to-day business operations. But she adds that some companies may change their strategic approach to real estate.

“Overall the new standard is going to force businesses to reevaluate their physical space needs and how they approach that,” Spear says.   “A company that has a lot of leases might condense them or might buy space (instead of leasing).”

Spear adds that although the rules don’t go into effect for a few more years, Realtors® will want to get up to speed quickly. Those who do, Spear says, may find that these changes represent a real opportunity for them to assist their clients and help them make sound decisions.

“Even though the standards aren’t going to go into effect for three or four years, we want a long lead time to get ready for this,” Spear says. “If you can, start talking to your clients early and often, get educated, and work with your accountant, and you’ll come out on top.”

More information on FASB’s rule change is available in the following video on