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Lease Accounting Webinar - A New, Single Approach

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Lease Accounting WebinarWhat do the new International Accounting Standards Board/Financial Accounting Standards Board (IASB/IASB) changes to lease accounting standards mean for your organization?

Get the perspective you need during this lease accounting webinar featuring a panel discussion, were we take a deep dive into the potential impacts of the agreements-to-date, and discuss the four issues that remain on the IASB/FASB agenda for Q1 2013. Leading industry experts give meaning to - and reasoning behind:

How a lessee will account for leases under the single lease expense (SLE) approach
How the new classification of leases will impact your balance sheet
How revenue recognition will apply for sales and leaseback transactions?
How the application of controlled criteria to revenue recognition will impact your organization

This video is from the Proformative webinar "A New, Single Approach to Lease Accounting" held on November 29, 2012.

 

Lease Accounting Webinar

 

We have a number of learning objectives, fundamentally we'd like to bring everyone up to speed on the latest lease accounting standards, where they are today, where we think they're going, and what the impacts will be to those who adopt these standards. That's a lot of ground to cover. We're going to certainly do our best to get there.

We have just 60 minutes to do it, so it's a lot to get through and we certainly won't hit every level of detail, but hopefully give folks a good view into what's going on. Probably, more importantly, give you some insight as to how you can prepare yourself and your organization for these upcoming changes.

A quick look at the agenda, We are going to have a really quick overview of the new leasing as they stand today from Pete Graham, who'll I'll introduce momentarily. Then we'll be hearing from the Manager of Accounting Policy at General Mills, Angela Ammann, who will discuss what she and her group at General Mills have been doing to prepare for these changes.

Then we'll be taking a closer look at the proposed standards changes and we're going to hear from the four gentlemen listed there who I will introduce at that time. Then, we certainly hope to have some good time to take questions from the audience, and hear from all of today's presenters as we go through those audience questions.

That's a quick look at today's agenda. Without further ado, let's go ahead and get ourselves kicked off. Helping us on that front this morning is Pete Graham. Pete Graham currently leads the global activities on IFRS, Accounting Change and Mobility for Finance Solutions at SAP. He often helps customers understand the latest information about SAP solutions and how those solutions can make their companies run better.

Pete also works with SAP colleagues and partners to bring new solutions to market. He has 15 years of experience in the enterprise software industry in a variety of product and operational roles. Pete, welcome this morning and please do take it away.

Okay, well folks, I'm sorry we're having some audio difficulties with Pete who we were hearing just a few minutes ago. Well, my apologies folks. I think what we're going to do is actually ask another presenter to grab these slides, and thank you to Sean [Tor] for offering to do that. Sean, I've just given you control, although if you like, I can actually forward the slides for you and get us into this. Sean, do you want to jump in.

Yes, John. Good morning. Good afternoon to everyone online. John, if you wouldn't mind just forwarding the slides that will be helpful.

You bet. All right, go ahead.

With respect to these standards, we've obviously been down a long journey here for a while now around the topic. The first being the ISP is definitely coming closer to getting to a point of kind of agreement. They've actually going to finalizing, really, deliberations and are getting close to reissuing their second proposal draft on the topic of leasing. We're expecting that in the first quarter of 2013.

The boards have both indicated that the standard will be finalized at least in '13, or maybe '14. It's still yet to be determined. The main objective of the proposed rules is to really eliminate the current model of accounting where we have operating and capital lease accounting. It basically will bring all leases with the small exception of very short-term leases onto the balance sheet.

We'll go through some of the kind of impacts, and I know John has got some slides teed up on what the financials will look like. Really, it will kind of drastically change the way lease accounting is currently for most lessors and lessees.

We have at the bottom of the slide just kind of an overall timeline. That is still to be finalized by the boards. It's looking like it's about a 2017 effective date, although they have not yet made any affirmative statements, other than it would be no earlier than 01/01/2016. You're looking at planning for '17. I know companies that many of us have worked with have planning assumptions of either late '16 or '17.

The key point, though, is the boards have indicated this will be retrospective. You will back up to your opening balance sheet reflecting the comparative financial statements. Assuming an effective date for the public filing in the U.S. of 12/31/2017, you would back up to 01/01/2015 for that opening balance sheet creation.

I think most companies that have been looking at this challenge have realized that there's nothing that you can do retrospectively in '17. You would have to get ahead of the curve and then be ready for that opening balance sheet as the portfolio leases evolves.

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That's kind of high level where we stand. John, if you could maybe move to the next slide, we'll go through in a little bit more detail, the new models that the boards have proposed. There really is a kind of model for leases that are property related, and this relates to the expense recognition pattern and then those that are non-property related, so we'll go through that in just a bit.

Then, also the lessor and lessee, it's kind of looking at it from different angles there. The boards have tried to create some degree of symmetry between lessor and lessee accounting, but there are some nuances and things to be thinking of and comprehending as well.

Then, the real key here is what are the kind of key challenges, and what are things to be thinking about in advance, and that's the purpose of this webcast. We'll be covering on many of these topics as we get into this session, but just to kind of start the thinking around this, firstly is just the visibility of many organizations to their lease portfolio.

Many companies that we meet with, one of the first things they say, they don't really even have a feel for how many leases, where the leases are, what state the data is in relation to those leases. The visibility of the portfolio is a common challenge that we hear.

Another thing that we commonly hear is just there's not really a way to understand the pro forma impact of the standard. A lot of times, there's a large number of leases involved, and the calculations to get the impact, there's a number of calculations they have to run in determining that value of the right to use that and the liability.
There's not really an ability to be able to do that "What if?" scenario analysis.

Solutions, and then we're going to have a segment on systems during the session and just understanding what are the available options that are out there? There are some short-term solutions that are currently in the marketplace as well as longer term solutions that companies should be thinking about.

These are just some of the topics that I wanted to just get on the table just to start with. As we go through the panel discussion, we'll cover upon many of these topics.

John: Thank you very much, Sean, for jumping in like that and covering the first few intro slides and saving our bacon there. We're going to go ahead at this point and launch the first of what will be three polling questions. You should be able to see that up on your screen right now. As I mentioned up front, if you're here for CPE credit you must
answer all three of these CPE questions. Even if you're not, we'd love to see where folks stand on this.

If we have time at the end, we're going to go ahead and turn these polling questions around and ask the panel for comments on what they're seeing here. It'll be interesting to see where you stand relative to your peers. I'll go ahead and leave this out for another five seconds. If anyone hasn't had a chance to vote yet, we'll go ahead and get the vote, and then we'll get to the next speaker.

Okay, I'm going to go ahead and close that down, and we'll get to our next speaker. It is my pleasure to introduce Angela Ammann. Angela, thanks so much for joining us this morning.

Angela: Thanks, John. I've been following lease projects for about three years now, actually before I joined General Mills. I've also done some benchmarking with other large companies.

End partial; Lease Accounting Webinar

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