Posts by Ed Muna

Lease Accounting Changes and How the Renewal Option Became Your Latest Liability

on August 21, 2017

The Financial Accounting Standards Board (FASB) recently issued an update (ASC 842) that will require businesses to rethink how they structure real estate leases going forward. The code change, which will be implemented in 2019 (2020 for private companies), requires companies to put the capitalized value of their lease obligations on the balance sheet as a liability and asset (“Lease Liability” and “Right of Use Asset”). As it currently stands, almost all lease costs are limited to the income statement and might only appear on the balance sheet as a footnote. Because there is no grandfathering for existing leases and financial statements include a two-year look back, the decisions being made today will impact the financial statements of the future. This has many decision-makers taking a closer look at leasing transactions to see how this liability can be reduced.

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Ed Muna

Ed Muna is a senior vice president of Hughes Marino, an award-winning commercial real estate company specializing in tenant representation and building purchases with offices in San Diego, Orange County, Los Angeles, San Francisco, Silicon Valley and Seattle. Ed heads Hughes Marino’s Lease Administration and Audit Service divisions and helps tenants address issues that arise during their occupancy. Contact Ed at 1-844-NO-CONFLICT or ed@hughesmarino.com to learn more.

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