Bring your vehicle's lease onto your company balance sheet

Financial Planning

For public companies following FASB standards, the effective date for implementation is for the fiscal year beginning on or after Dec. These new accounting regulations will have a significant impact on companies that are leasing or expect to lease their vehicle fleet.

The new standards change how lease assets are accounted for and presented on the balance sheet and should not impact the decision in the "lease vs. purchase" debate. Both the IASB and the FASB have stated that the intent behind these revisions was to improve the transparency related to leased assets. As such, an investor’s assessment of the company’s performance is not likely to change; this is especially true for investors in the fixed rate market.

In order to do the calculation, the company needs to make a number of assumptions and these will need to be disclosed in the financial statement footnotes. Full-service lease products will make the accounting more complicated due to the presence of the services component in the lease payment. This accounting change may result in significant investments of time and resources to ensure that companies are ready to implement the requirements under this standard.

Companies decide to lease for a number of different reasons, all of which remain viable under the new accounting standards. As the new standards take effect, proper reporting, compliance and other associated factors need to be considered in the decision-making process.

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