Click here to view the video on YouTube.

Don’t miss the discussion between Andrew Zezas of SIOR NJ and Marc Betesh of KBA Lease Services & Visual Lease.  Together they outline the upcoming changes to lease accounting under GAAP and their potential impact on commercial real estate, developers and occupants. 

Topics Include

FASB and IASB:  Who Are They and Why Are They Important?
Upcoming Changes and Reasons behind the Initiative
Treating a Lease like an Asset
The Effect of Draft Delays, Roundtables and Comment Letters
Renewal Options and Inaccurate Projections
Evaluating the Likelihood of Exercising Options and Economic Incentives to Renew
What Tenants Should Do Today

Marc Betesh, President and founder of Visual Lease and KBA Lease Services, will be speaking about FASB’s upcoming lease accounting changes at the NRTA Annual Conference on Septermber 12th, 2011.  Marc’s presentation “FASB:  The Conceptual Background & the Effects On Future Lease Negotiations,” will help retailers address tremendous concern across the real estate industry.

Realtor magazine, the official magazine of the National Association of Realtors, talks FASB with Marc Betesh.

In the article, titled The Facts On FASB, Realtor Magazine’s Mariwyn Evans questions FASB’s proposed changes to lease accounting rules.

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Proposed changes by the Financial Accounting Standards Board to lease accounting rules could make record-­keeping a lot more complicated and lease negotiation more difficult, says Marc Betesh, president of KBA Lease Services and Visual Lease in Woodbridge, N.J.

What are the changes that the Financial Accounting Standards Board (the private-sector group that sets rules and reporting standards for ­accountants) is proposing for leases?

The fundamental change under FAS Topic 840 is that all off–balance sheet transactions involving operating leases, which includes most real estate leases, will be eliminated. Currently, companies don’t show operating leases for real estate on their financial statements, except in footnotes.

How will companies account for their leases if the new rules are adopted?

Leases will appear on a company’s financial statement as though the company had purchased and financed the leased asset. The lease will be shown as a “right-of-use asset” with a corresponding liability for the rent payments and any direct costs like brokerage commissions. The actual figure used will be the net present value of the rent calculated at the interest rate it would cost the company to borrow money. The liability appears the same way, although direct costs are excluded. As the company makes rent payments, each payment is recorded as a payment of principal (a portion of the NPV of the asset) and interest. This amortization requirement could mean that a disproportionate amount of the rental liabilities will shift to the first years of a lease.

Why are the changes eliciting such controversy?

There is a lot of debate on two points—operating expenses and lease options. The right-of-use asset is supposed to cover only the pure use of the space, not the cost to service it. So companies will have to separate out service costs like common-area maintenance charges, taxes, and insurance from the right to use the space. Stripping out these costs will be easy with a pure triple-net lease since the tenant pays all those costs separately. It’s more muddled with a modified gross lease since the landlord pays these costs for the first, or base, year of the lease.

What is the issue with lease options?

Under the new rules, tenants will have to consider how likely they are to exercise lease options from the first day they sign a lease. If they are likely to extend a lease, they have to include the option term and the option rent in their calculations. Making the option decision so early is very subjective and seems to undermine the purpose of the rule change, which is to provide more transparency and reliability in financial statements.

To make things even more complicated, the tenant also has to re-evaluate these probabilities on a regular basis and recalculate the amortization to reflect any changes.

How could these changes affect the overall leasing climate?

Under the new proposal, tenants may prefer shorter leases, which will be problematic for landlords that need longer leases to secure financing or sell a property at a higher price.

When will the proposals be finalized?

It seems likely that the proposals will be enacted sometime this year and go into effect a year or more later.

Duke Long interviews Marc Betesh, President and CEO of Visual Lease, about upcoming FASB changes at Corenet’s Chicago conference.

Click here to view the video on YouTube.

Tomorrow’s webinar will explore the underlying theory behind the proposed FASB changes.  IFMA, a professional association for facility management professionals,  and Visual Lease’s President, Marc Betesh, will outline the potential ramifications and offer advice as to best prepare for the impact.

Topics Include:

1. Why the Changes Were Proposed
2. What Will Change
3. Impact on Lease vs. Buy Decisions
4. Treatment of Gross vs. Net Leases
5. The Most Current Updates/Deliberations/Alterations Made to the Original Exposure Draft
6. How to Start Preparing Now

Background:
Last August, the Financial Accounting Standards Board (FASB) sent shockwaves through the commercial real estate world when they proposed significant changes to how leases must be recorded in a company’s financial statements.  Although the Boards continue to deliberate, every major company (any company that follows GAAP) will be impacted by the upcoming changes.  At a minimum, substantial attention and manpower will be required to comply with the new rules.  But the changes could also impact such decisions as whether to lease or buy or how buildings will be serviced.

The Chicago Summit has kicked off with a great turnout, learning opportunities and networking.  Marc Betesh and Chris Werely sat down with Duke Long today to talk real estate technology and the upcoming lease accounting changes.

Check in at www.dukelong.com for the full video.

Marc Betesh and Chris Werely are headed to Chicago this weekend for the CoreNet Global Summit. If you are headed to the summit, say hello. If not, stay tuned to the Visual Lease blog for daily updates on the topics of conversation, speakers and other real estate buzz. We are very interested to learn how end users are preparing for the FASB’s changes to lease accounting.

We are expecting to see more people using iPad’s and contributing to the social media updates coming out of CoreNet. We will definitey be showing off Visual Lease on the iPad!

We recently had the opportunity to chat with Duke Long and Jason Sandquist from CREpodcast about the proposed FASB/IASB lease accounting changes and how all parties can prepare.

Marc and Chris drop some serious information on what could be a coming storm if businesses, tenants and commercial brokers are not prepared. We discussed the impact on the industry as a whole – as well as what the affects will be for both tenants and landlords in regards to how they handle lease accounting. They also fill listeners in on how to start planning for these changes and implementation strategies if the proposed changes do take affect.

Visit KBA Lease for more information on lease auditing and don’t forget to check out their blog as they keep it up-to-date with all the latest news as well as Visual Lease, which is the offers some of best leasing management software around.

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Visual Lease’s management team, along with Grant Thornton recently hosted a webinar to address the impact on corporate real estate under the FASB/IASB’s proposed lease accounting changes.

The presenters include some of the country’s top real estate lease experts, Marc Betesh and Lou Ferro, as well as Gary Illiano, National Partner at the CPA firm Grant Thornton.

If you were not one of the hundreds who attended, and would like to watch the replay and download the slides, it is now available. Please click here or on the image below.

Marc Betesh, President and founder of Visual Lease and KBA Lease Services, is scheduled to speak about the FASB’s upcoming lease accounting changes at the New Jersey chapter of SIOR on February 2nd, 2011.  Mr. Betesh’s presentation “How Proposed Lease Accounting Changes May Affect the Brokerage Business,” will help commercial real estate brokers address tremendous concern across the real estate industry.  The event, hosted at the Wine Library in Springfield, NJ, will be geared towards educating and informing SIOR members of the impending changes.  

Mr.Betesh and Lou Ferro of Visual Lease and KBA Lease Services, in conjunction with Gary Illiano of Grant Thornton, will also be hosting a free webinar on Feb 2nd at 12pm EST outlining the impact on corporate real estate due to the upcoming changes. 

 To register please email sales@visuallease.com or visit www.kbalease.com/fasbwebinar.