Most companies are aware of the pending FASB changes, and some have even estimated the impact ASC 842 will have on their financial statements. CoStar Real Estate Manager has done more than talk about it. We’ve provided details about the specific data fields that must be captured to meet new requirements. These data elements have already been delivered in our software to our customers, allowing them to gather additional information while getting their real estate data ready for the pending standard. For many new customers, this is all part of one cohesive exercise during their initial CoStar Real Estate Manager software implementation.
Don’t bury your head in the sand.
CoStar Real Estate Manager is meeting the “FASB Challenge” head-on, and so should you. Here are six reasons why:
- Real estate data is taking on greater visibility.
- More lease data will be needed.
- Abstracted lease data will need to be stored differently.
- Lease administrators will have more decisions to make.
- Transitioning to the new standard will require a significant effort in addition to the current workload.
- The new FASB standard applies to non-real estate leases.
These challenges point to the need for more centralized corporate involvement, a system to support collecting all the relevant data and keeping restatements, and the ability to manage the most likely need for new corporate policies and accounting. This will require coordination and effective communication from more parts of the organization than ever before.
Retailers face additional challenges.
In addition to the six challenges listed above, retailers also need to consider the following:
- More guidance will be needed to distinguish a lease from a contract.
- Tenants may opt for shorter leases to minimize the initial recognition of lease expenses.
- Co-tenancy can significantly affect the outlook for a lease
- The projected expense of “leave-in-condition” clauses must be estimated.
- Determining the recognition term will require judgment.
Hold on to your hat!
If you ever doubted the complexity and amount of work required to meet reporting requirements under the new standard, the 50 FASB-Focused Data fields defined in this document should help you face reality! These data elements were added to the CoStar Real Estate Manager software system in January 2012. We are closely monitoring FASB announcements to find out if there are any additional fields needed preemptively.
Added benefit? Better real estate decision-making.
It’s easy to become cynical if faced with all the responsibility and work involved in preparing and working with the new FASB standard. However, having at your disposal instant access to complete, accurate, and consistent real estate information means you will not only be able to meet the challenges of the new lease accounting standard, but you’ll also make better real estate decisions for your company. The new FASB standard gives all of us in the commercial real estate industry the “compelling event” needed to improve our worlds.