December 13, 2010
The following is a letter on behalf of Lucernex, Jim Duport, our in-house real estate finance expert, sent on December 7th, 2010 to FASB in response to the proposed changes to the lease accounting standards.
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Technical Director Financial Accounting Standards Board File Reference 1850-100, FASB 401 Merritt7 PO Box 5116 Norwalk, CT 06856-5116 |
sent via email to: Director@FASB.org Subject: File Reference 1850-100, FASB |
Re: Proposed Account Standards Update – Leases (Topic 840) |
November 15, 2010
Lucernex real estate finance expert Jim Duport, after completing an upgrade to our core financial engine to support the new proposed FASB / GAAP rules, discusses how probability used to be used with the new FASB rules.
This is the second in a series of Blogs by Jim describing his findings during the process of developing the architecture within the core Lucernex financial engine to handle the new proposed FASB rules.
In my previous life I was a math major (actually also a high school math teacher), but, more importantly, I have a friend who is a PhD in Math. I figured if I didn’t understand the probability in the multiple examples I have seen of the new PROPOSED FASB Lease Accounting, then others might also be having issues understanding it. (more…)
November 1, 2010
Lucernex real estate finance expert Jim Duport, after completing an upgrade to our core financial engine to support the new proposed FASB / GAAP rules, discusses an interesting finding – in certain circumstances, the new GAAP can be cheaper.
This is the first in a series of Blogs by Jim describing his findings during the process of developing the architecture within the core Lucernex financial engine to handle the new proposed FASB rules.
I started the substantial upgrade of Lx LseMod version 15, including changes to the core Lucernex financial engine, in July. After over 500 hours, it is virtually done. Since it includes a Transaction Date that can be different from the Lease Commencement Date (even exact days such as the lease starting on the 12th of the month), and Renewal Option Rent Calculations, I have been able to “test” a variety of real world scenarios under the Proposed New GAAP. Note: Lx LseMod provides for a 30-year lease term and 5 renewal options for a total of another 30 years. (more…)
October 4, 2010
Lucernex expert Jim Duport discusses the potential impact of the FASB GAAP lease accounting changes on the lease versus buy decision.
A FASB goal is transparency and to match revenue and expenses including commitments of future expenses. Towards this goal, the PROPOSED FASB change in the GAAP lease accounting would require that the Rent Calculated (or estimated in the case of percentage rents) would be booked as an expense to the P&L and shown as an asset on the balance sheet taking into account “probable” renewal periods.
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September 20, 2010
Lucernex expert Jim Duport discusses the proposed FASB GAAP lease accounting changes.
So, the GAAP lease accounting rules are changing with the dual goals of increased transparency and full disclosure. Don’t panic yet. There are still a number of unanswered questions. FASB (the Financial Accounting Standards Board) released a DRAFT on August 17, 2010 with a request for comments by December 15, 2010. The implementation date has not even been set. I have heard dates ranging from 2012 through 2015.
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March 15, 2010
Lucernex expert Jim Duport discusses the 5 rules you need to know about GAAP/SOX. Learn more about Lx LseMod Corporate for lease analysis including GAAP impact.
1. Rent straight-lined over the term if rent increases are known. |
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| Impact: | First Fiscal year cost will increase |
February 21, 2010
Lucernex expert Jim Duport discusses GAAP sublease accounting.
2012 Update to this blog is at: GAAP FASB Sublease Accounting for Retail
Our interpretation of GAAP sublease analysis according to FASB accounting rules is as follows:
Overview: Start by determining the net present value of all rental costs including write-offs of depreciation and subleasing costs, offset by the sublease income (the NPV write-off). The Income Statement (Profit & Loss statement) is then charged the NPV write-off and it is charged an interest expense based on a declining balance of the NPV write-off, the accretion interest expense. The declining balance is determined by taking the net monthly costs (including sublease income) and the interest expense and deducting that cost from the NPV write-off.
February 14, 2010
Lucernex expert Jim Duport describes the important of the P&L statement and compares use of Cash flow analysis vs P&L analysis.
Intended for Corporate Real Estate Managers and Tenant Rep Brokers.
First and foremost, in a corporation the cost charged to a manager’s budget is the PreTax P&L, not the Cash Flow. Since performance evaluations and bonuses are based on budgets, it is important to know how the impact of an action (e.g. leasing space) impacts the budget.
Profit & Loss (P&L) is what companies use when reporting financial results. A company’s P&L is perhaps more important than its Cash Flow. It shows whether or not a business has achieved its primary objective – earning a profit.
You have probably heard people say, “Profitability is key.” Profitability is different from Cash Flow. Profitability is the number reported to Wall Street and quoted in newspapers in earnings per share (EPS).
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