Should You Lease?

October 16, 2018 by OSYB Staff

Bloomberg Accounting Blog shares some things to consider when making leasing decisions due to the new lease accounting standards.  Here are some things to consider:

• “Historically, many companies were attracted to leasing because under the old rules, companies could keep their leases off-balance-sheet. Now, under the new leasing standard ASU 2016-02, companies are required to recognize all leased assets and liabilities on their balance sheets.”
• Make choices that make the most financial sense for your company.  For example, building leases may still be the better choice as the investment required for real estate can be prohibitive.
• “We may start to see more short term leases, leases with more renewal options, and leases with more variable payments (as opposed to fixed payments). But, short term leases may require economic trade-offs. The shorter the lease terms are, the more exposure companies have to risks such as pricing risks.”

“Companies need to weigh the costs and benefits when making their lease vs. buy decisions.”  Companies can also go beyond meeting the new compliance requirement and utilize this opportunity to reevaluate their processes and/or explore new processes that may enhance business practices.  As always, with complex changes, please contact the appropriate financial professionals.

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For more details:  Thinking About Shifting Away From Leasing? –Here Are A Few Factors to Consider Before You Make the Decision

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