21 November 2016

Lease Satisfaction Scores Tougher than CMS’




How FASB and debt markets will grade healthcare organizations’ leases

  • Because of the prevalence of capital leasing for many companies, FASB and IASB have amended accounting guidance (ASC 842) to provide more reporting on lease transactions.
  • IASB and FASB differ on how operating leases will be disclosed and valued on the financial statements. For this purpose, we will focus on the FASB guidelines.
  • The new accounting standards require organizations to recognize all lease obligations (over 12-months) on their balance sheets, to ensure greater transparency in financial reporting.
  • Healthcare providers will need to begin monitoring the potential effect of these changes on their debt-to-capital ratio and related debt covenants.
  • Regulations take effect in 2019 and 2020, but back reporting begins in 2017 (for public companies) and 2018 (for private, non-profit and government organizations), so time is short to understand and manage implementation.
  • Hospitals and health systems will be particularly affected by the new reporting standards due to the capital-intensive nature of healthcare service delivery.
  • Missteps in managing this change can result in loan covenant defaults, souring investor sentiment and/or failure to meet benchmarks.
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21 November 2016

No More Leases in the Junk Drawer




How FASB has changed lease accounting and performance bonuses at the same time

  • Because of the prevalence of leasing for many companies, FASB and IASB have amended accounting guidance (ASC 842) to provide more reporting on lease transactions.
  • The new accounting standards require organizations to recognize all lease obligations (over 12-months) on their balance sheets, to ensure greater transparency in financial reporting.
  • Companies will need to begin monitoring the potential effect of these changes on their debt-to-capital ratio and related debt covenants.
  • Regulations take effect in 2019 and 2020, but back reporting begins in 2017 (for public companies) and 2018 (for private, non-profit and government organizations), so time is short to understand and manage implementation.
  • This change is an opportunity to better manage accounts payable for leases and communicate to the market a mastery of good financial governance.
  • Missteps in managing this change can result in loan covenant defaults, souring investor sentiment and/or failure to meet benchmarks.
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