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Lease Accounting

ASC 842 requires that all leases – regardless of whether they’re operating or capital leases – now be included on the balance sheet. With the potential for significant impact on financial results, successful implementation depends on professional knowledge most companies don’t possess and that audit firms are restricted from providing.

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The Challenge:  For businesses, the central tenet of ASC 842 is that virtually all leases must be recorded on the balance sheet. In order to comply properly, companies need to revamp both their approach to reporting leases and the process for negotiating them – increasing workloads for those involved in both processes. Additionally, more management judgments will be required to arrive at accurate values of every lease’s assets and liabilities over its life. By the time audit firms enter the picture, leases will already be fully executed and the opportunity to structure them in a manner optimal to the company’s primary financial metrics will have lapsed. The risk of unintended consequences on financial results is significant.

The Solution: Blythe Global Advisors has a proven track record of helping clients – from startups to brand-name entities, U.S.-based and international – resolve lease accounting issues. Our lease accounting experts have completed dozens of engagements. Our clients can attest that we hit the ground running and that we always leave companies ready to meet their reporting obligations and better situated to reach their strategic objectives.

We achieve our consistently high results through BlytheTeam©, our alliance of former Big Four partners/executives, current industry entrepreneurs, and former corporate finance and accounting senior executives/professionals. These experts bring extensive knowledge of U.S. and international accounting principles and regulations, seasoned leadership, project management skills, and expertise across a wide range of industries to every engagement. Our end-to-end approach ensures that leases are not only reported properly after they’re signed, but also structured properly during upfront negotiations.

Our Services: For businesses needing assistance to bring their lease accounting practices into compliance, we can take this critical item off their plate with a soup-to-nuts approach that features turnkey implementation; customizable, flexibly priced solutions; knowledge transfer and measurable results. Our services include:

  • Assessment of existing leases: We forecast their impact on primary financial metrics under ASC 842 implementation.
  • Recommendations regarding new leases: We evaluate the overall leasing strategy – including the impact of the rule on processes, workloads, systems and culture – both within and beyond the general accounting and financial functions. We analyze prospective new leases to help structure leases that maximize EBITDA.
  • Preparation of a blueprint for compliance including implementation of updated or new systems, policies and/or procedures.
  • Production of audit-ready documents.
  • Liaison to the audit firm – anticipating needs, reducing costs and providing value up and down the reporting chain.
  • Companywide training as needed.

Here are a few of our lease accounting engagements:

  • Assisted a $450 million private equity-backed retail company evaluate more than 300 leases representing potentially $100 million for proper accounting treatment and classification.
  • Helped a venture capital-backed company evaluate and structure $40 million in lease commitments in the context of both current lease accounting guidance and ASC 842.
  • Assisting retail, technology and health science companies evaluate the impact of ASC 842 on existing lease portfolios.

See some of our lease accounting clients here.