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By Amir Dabiri - July 11, 2017
Starting in 2020 the new FASB Lease Accounting Standards will go into effect. These Standards overall are not expected to have any major changes for the LHPH and Financing Companies, but will have a change in how their customers, the Lessees, will report them on their books. A couple of the key changes are as follows:
– Capital Leases will become known as Finance Leases, with few accounting changes for both the Lessee and the Lessor.
– Operating Leases will remain known as Operating Leases, with few accounting changes for the Lessors’. For the Lessee, they will have to record the Lease Payments at Present Value as a Liability with an equal Asset on their balance sheets. As a result customers may be more inclined to have additional products such as Service Contracts and Insurance to be separate from the Lease Agreement to minimize their Liabilities.
Though the majority of the changes will not directly impact Dealers and Finance companies, it is always recommended to learn how new Standards can affect their customers in order to be prepared for potential changes in demand. To view the full Accounting Standard please visit www.fasb.org for the ASU 2016-02 update.
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Advanced Business Computers of America (ABCoA) develops and supports end-to-end software solutions for the subprime finance industry. Since 1983,
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