Did you heave a sigh of relief when the FASB compliance was pushed out to 2021? Your relief may have come a little too soon. Companies who have implemented or started the implementation process can tell you that it’s not an easy transition. This is especially true because the number, term, and type of lease will affect compliance. If your company is yet to get started on the implementation under the new standards, you may want to consider the following issues –(more…)
Due to the ever-increasing need for better and improved networks, telecom companies have to constantly innovate in order to stay relevant with the changing technology and meet changing consumer needs. Due to this constant innovation and upgrading as well as the ease and affordability of leasing–rather than owning–many telecom companies are expanding their infrastructure by acquiring assets on lease. As a result, telecom lease portfolios are large and complex. But telecom companies have their fair share of struggles in terms of project completion, resource utilization, and untimely payments. Let’s look at some common challenges and how it can be resolved.(more…)
In our previous blog, we spoke about CAM & tax billing errors and why the possibilities of such errors make it imperative to have a well-defined Right to Audit in the lease. But the tenant’s auditing rights can be ambiguous and limited. To address these issues, a clear understanding of the various levels of audit rights and limitations is required. In this blog, we explore the different levels of audit rights every tenant should be aware of.(more…)
Common Area Maintenance or CAM expenses in a lease specifies the tenant’s proportionate share of the operating expenses which is incurred by the landlord for the operation of the premises. Tenants depend on their landlords for various services but often they lose focus on their lease obligations and end up overpaying their landlords. And this oversight is replicated year after year, unmonitored. Hence, it is important to verify whether the charges levied by the landlord for these services are based on fair market prices. This is where a CAM & Tax audit will be beneficial for the tenants. A CAM & tax audit is the process of analyzing and verifying the charges being paid to the landlord in order to make sure there are no deviations from the terms agreed between the landlord and the tenant. By verifying the expenses passed on to the tenant, a CAM & tax audit can help tenants save thousands of dollars that would otherwise be lost due to mismanagement and misinterpretation of the lease language.(more…)
Lease abstraction is the process of summarizing key, high-level information of a lease. A lease abstract gives you exactly what you need for due diligence, in a concise format. But abstraction of leases is more like an art. It requires skill and patience. The main challenge arises when a landlord or tenant has a huge portfolio of leases and they don’t have a solid process to abstract leases effectively. Moreover, FASB ASC 842 requires abstraction of as many as 55 data points from leases to meet their compliance requirements. And without an abstract, it will be tedious and time-consuming to analyze all the key clauses for each lease. (more…)
With the new accounting standards, equipment leases with a duration of more than 12 months must be recognized on the balance sheet. This change in financial reporting has had a huge impact on companies who are not prepared to handle the mammoth task of sifting through the equipment leases and making the necessary transition.(more…)