Commercial Lease Insights

Money-Saving Advice for Tenants From SVP 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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About this Author

Ed Muna

As senior vice president, Ed Muna leads Hughes Marino’s Lease Administration and Audit Service divisions, and represents tenants in California and beyond in their transactions for commercial space. Ed has many years of experience digging deep into leases on both the landlord and tenant side. His broad expertise and eagle eye have helped countless tenants save money on their leases, and address issues that arise during their occupancy.

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