Almost half of C-suite executives are agonizing over whether implementation of the new FASB lease accounting standards will get done on time. A recent Deloitte webcast poll of more than 2,500 C-suite executives found only 40% were not concerned about their company’s ability to adopt the new lease accounting requirements by their respective deadlines. Public companies are required to begin applying the new rules in 2019, while private companies have an extra year. Another 47% in the Deloitte poll said they were somewhat or very concerned about whether the job of transitioning to the new standards would get done on time.
Valuation experts should be aware that, under the new rules, lessees will see increases in EBITDA as well as leased assets and financial liabilities on the balance sheet. Companies with material off-balance sheet lease commitments will see significant changes in key financial metrics such as leverage ratio, return on invested capital (ROIC), and valuation multiples.
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