10Minutes on the future of lessee accounting

February 2011
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The future of lessee accounting

At a glance

As early as 2014, in the US and internationally, leases could be required to appear on companies' balance sheets, which will impact debt and earnings metrics, and some companies' ability to borrow or spend capital PwC looks at the issue, and how procurement, IT, tax, treasury, operations, HR, finance and accounting can all be affected.

As early as 2014, in the US and internationally, leases could be required to appear on companies' balance sheets. The new rules are expected to affect an estimated $1.2 trillion in current leased assets, ranging from store locations and medical equipment to aircraft and manufacturing machinery.

These changes will force companies to put a new lens on leasing practices. Debt and earnings metrics will change, and some companies' ability to borrow or spend capital may fall because of the increases in their debt-to-equity or capitalization ratios. Existing lease tracking systems will not be adequate under the new standard. New systems and controls will need to be planned for as early as 2012.

The transition will require all hands on deck – procurement, IT, tax, treasury, operations, HR – in addition to finance and accounting. This edition of 10Minutes provides further insight on the future of leasing, how companies will be impacted, and next steps to consider.

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