Commercial real estate companies are in the early stages of preparing for significant accounting changes that are set to go into effect in 2019. “In the beginning of 2016, FASB and the International Accounting Standards Board came out with new lease accounting standards,” according to Michael Billing, a managing director at JLL. “Effectively, those standards will put all leasing activity on the balance sheet of organization,” he said. “There will be some pretty monumental changes.”
The changes will directly affect all companies. “The changes are for all leasing activity, including real estate and equipment leases. It’s also for embedded leases in service contracts,” Billing said. “There are, however, different rules for publicly traded versus privately traded companies.”
Steve Miller, global lease accounting lead at JLL, added that commercial real estate owners and investors likely will start to hear from their tenants about the changes. “They’re likely to start hearing that tenants are thinking differently about leasing structures,” he said.