Lease Changes and Ramifications

2019 will be a big year for the treatment and reporting of leases and the impacts to the lessee, lessor, and company at large are shaping up to be significant.

Origin of Change

In a news release by the Financial Accounting Standards Board (FASB), it was noted that these changes have been a long time coming and first began in 2006 with the teamwork of the FASB and International Accounting Standards Board (IASB).

Reason for Change

Given the far-reaching effects, the FASB Chair, Russell G. Golden was quoted in the FASB news release explaining what brought about the changes: “the new guidance responds to requests from investors and other financial statement users for a more faithful representation of an organization’s leasing activities. It ends what the U.S. Securities and Exchange Commission and other stakeholders have identified as one of the largest forms of off-balance sheet accounting.”

Lease Importance

In their publication “IFRS 16: The leases standard is changing: Are you ready?,” PricewaterhouseCoopers explained the importance of leases to businesses and why, depending on the industry, they can be essential to operations: “leasing is an important and widely used financing solution. It enables companies to access and use property and equipment without incurring large cash outflows at the start.”

The importance of leases, therefore, directly correlates as to why these changes are consequential.

Old Method

Before delving into the changes and impacting ramifications, Work US detailed the old method of treating leases and explained that the reason the changes were made was due to a quest for transparency: “under the current accounting standards, leases must be defined as either finance or operating leases. Operating leases are treated as expenses on our income statement, leaving the balance sheet unaffected. Finance leases…are treated as both assets and liabilities on the balance sheet.”

Central Change

The deletion of the finance vs operating lease notation is the central change to the leasing standard and the basis for the impacting ramifications.

The FASB made clear in their news release that the “new ASU will require both types of leases to be recognized on the balance sheet” and “will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements.”

The significance of this cannot be understated as the effects will be felt by not only the parties to the lease but the accounting and IT departments of the company, as well.

Main Effect

Work US explained that due to the erasing of the finance and operating lease distinction, “all leases will be capitalized” and “trillions of dollars worth of leases are expected to be brought onto company books as a result.”


In their article “New leases standard-effective date and sweep issues,” EY published that the “IASB decided to require entities to apply the new leases standard for annual periods beginning on or after 1 January 2019.”

Work US further detailed that “public companies will be required to retrospectively apply the new standards to their 2017 and 2018 financial statements, with nonpublic companies expected to do the same for 2018 and 2019.”

Further changes

EY included the following decisions as central to the changes:

  • Lease modifications treated as a separate new lease;
  • Reassessment of the discount rate for Floating interest rate leases;
  • Costs associated with returning an underlying asset at the end of a lease;
  • Short-term leases and leases of low-value assets in a business combination;
  • Disclosure requirements for leases within the scope of IFRS 5.

These decisions are worth delving into further for any accountant and or accounting department to understand the true parameters of these changes and how the costs and finances of an entity will be truly affected.

For finance professionals that have just changed companies or are interviewing will new companies, studying the impact of these changes would serve you and the new/prospective company greatly.

Impacts and the way forward

PwC divulged that “the pervasive impact of these rules requires companies to transform their business processes in many areas, including finance and accounting, IT, procurement, tax, treasury, legal, operations, corporate real estate and HR.”

Street Fleet, a courier and logistics company, commented that “those in retail, distribution, agribusiness and logistics are expected to be most affected and should be aware of the potential consequences.” Once implemented, they are hoping for the financial transparency that the standard will require.

Work US suggested that given the likely increase of assets and liabilities for companies, short-term leases should be considered as well as ownership, when possible.

PwC put out the below list of ramifications and they are worth exploring:

  • Financial ratios and performance metrics redefined;
  • Stakeholder awareness and communication;
  • Implementation can be cumbersome and costly;
  • New IT systems and robust processes and controls needed;
  • Benefits to lessees beyond compliance and new opportunities for lessors;
  • Unexpected tax consequences may arise.

As January 1, 2019 is a little less than a year away, affected and interested parties should use the upcoming year to fully grasp the changes and the steps that need to be taken.



“Changes to lease accounting come 1 Jan 2019.” Street Fleet, 24 Jan. 2018. <;

“Changes to leasehold accounting standards in 2019.” Work US, 24 Jan. 2018. <;

“FASB Issues New Guidance On Lease Accounting.” Financial Accounting Standards Board, 24 Jan. 2018. <>

“IFRS 16: The leases standard is changing: Are you ready?” PwC, 24 Jan. 2018. <;

“New leases standard-effective date and sweep issues.” EY, 24 Jan. 2018. <$FILE/Devel114-Leases-Oct2015.pdf>


Corporate Tax Rate Reduction

The start of a new year always brings about fresh possibilities and resolutions. This year, in 2018, the American economy was given fresh possibilities by way of the tax bill that was passed just before the new year.

The Cut

Joe Harpaz, a Contributor for Forbes, explains that “at roughly 500 pages, the bill contains hundreds of changes to the U.S. tax code, re-configuring everything from individual income tax brackets to the individual mandate requiring every American to carry health insurance. But the real star of the show is corporate tax.”

The reason for corporate tax getting so much positive attention is because the rate was lowered from the current 35% to 21%, according to Forbes.

Craig Richards for the Fiduciary Trust International details that the bill “attempts to encourage capital spending by allowing companies to immediately deduct 100% of their expenses for qualified property that is purchased between September 27, 2017 and January 1, 2023.”

The Reaction

No matter an individual political opinion, a lessened corporate tax rate that spurs on business and helps grow the economy is a plus.

Dinesh Kanabar for The Economic Times says that the bill makes the “US corporate tax rate extremely competitive and will promote substantial growth.”

The New York Times’ Jim Tankersley, Thomas Kaplan and Alan Rappeport explain that “the bill is heavily weighted toward business, which would receive about $1 trillion in net cuts…”

Tankersley et al. included Speaker Paul Ryan’s opinion: “with this plan, we are making pro-growth reforms, so that yes, America can compete with the rest of the world…”

The U.S. Chamber of Commerce’s Chief Policy Officer, Neil Bradley, refers to the bill as a “home run for economic growth,” according to The New York Times.

In an article for the Wall Street Journal, Richard Rubin and Siobhan Hughes noted that business groups are “praising the decision to cut the corporate tax rate starting next year as well as the elimination of the corporate alternative minimum tax.”

Andrew Schmidt, an accounting professor from North Carolina State University who concentrates on taxes, was featured in the WSJ explaining that “unquestionably, these guys have to be jumping for joy…I can’t think of any business-oriented group that has not been pushing for this for the past 15 years.”

Perhaps a central reason for the passage of this tax bill is a compilation of all these reactions, and is embodied in President Trump’s opinion, found in the Wall Street Journal: “our current tax code is burdensome, complex and profoundly unfair.”

An Arduous Implementation

Because of the intricacies of the complex bill, the actual implementation of the new tax bill will require quite a lot of work. Aspects of a company’s finances that will be affected, according to Forbes, are global trade strategy, earnings forecasting and capital expenditures.

Foreign/Offshore Money

Harpaz explains that the tax bill “also contains special provisions that let U.S. companies repatriate their foreign earnings back into the U.S. at a reduced tax rate.” The reduced rate that Harpaz mentions is 12% for cash and 5% for illiquid assets, as explained by Richards in the Fiduciary Trust International.

The result of this, explains Kanabar, is that “US corporates will have no incentive to leave profits overseas, and would rather get them to the US.” The impacts on foreign money is important as the more money that comes back to the US, the better off our economy will be.

Going into more detail, Richards discusses that “any dividends a business receives from an overseas subsidiary could also be deducted as long as the company owns 10% or more of the foreign corporation.”

Tankersley et al. for The New York Times delves into the reasoning, discussing that “the effort is aimed at preventing companies from shifting profits abroad and grabbing back some of the tax revenue on income earned overseas…the White House has said more than $2.5 trillion in American profits are held offshore.”

The bill is not only structured to provide incentives to bring back foreign/offshore money to America, but it includes a financial penalty for sending money back overseas. Tankersley et al. note that “it would also force American subsidiaries of foreign-owned companies to pay a 20 percent excise tax on any payments send back to foreign affiliates.”

In discussing steps that companies should take, Deloitte suggests that “companies should confirm there is appropriate documentation of existing E&P, tax pools, and foreign tax credit carryforwards.”

Responses and Suggested Steps

Joe Harpaz spoke with a group of well over 1,000 tax professionals that work on corporate and trust taxes and found that about 30% are taking a “wait and see” approach to the changes that will be coming forth from the bill, about 14% are explaining the impacts to their company and about 5% are discussing the tax bill with their senior management and Board.

Just like last month’s GAAP change article ( explained, it is very important to keep upper management, the Board, and key stakeholders in one’s company abreast of salient financial updates and changes.

Deloitte highlights that the “bill would require companies to remeasure their deferred tax assets and liabilities as of the date of enactment. Any tax effects resulting from enactment would need to be accounted for in the reporting period of enactment.”

A second recommendation from Deloitte is that “companies should confirm there is appropriate documentation to support adjustments to the resulting deferred tax, income tax payable or income tax receivable balances.”

The same group of tax professionals that Harpaz spoke with also elaborated on how their accounting strategies will be reformed. As he reported it in Forbes, “59% said they were already considering near-term actions…11.2% said they are planning to accelerate or defer expenses, 4.1% are planning to address their offshore assets…”

It will take awhile for each company to become adjusted to the intricacies of the new tax bill, but 2018 is starting with a corporate tax cut that will create business incentives and maintain a strong economy.



Harpaz, Joe. “Corporate Tax Pros Already Prepping for Tax Reform.” Forbes, 18 Dec. 2017. <;

Kanabar, Dinesh. “Corporate taxation: Prepare for a US homecoming.” The Economic Times, 18 Dec. 2017. <;

“Preparing for Tax Reform: Action items necessary to record financial statement impact.” Deloitte, 18 Dec. 2017. <>

Richards, Craig. “Ready for Tax Reform? How to Prepare for the Unknown.” Fiduciary Trust International, 18 Dec. 2017. <;

Rubin, Richard and Hughes, Siobhan. “House, Senate Republicans Reach Deal on Final Tax Bill.” The Wall Street Journal, 18 Dec. 2017. <;

Tankersley, Jim et al. “Republican Plan Delivers Permanent Corporate Tax Cut.” The New York Times, 18 Dec. 2017. <;

GAAP Changes for 2018 and the Impact on Accounting and Finance Professionals

The 2018 financial reporting season will be an important one as it marks the beginning of the implementation of the new GAAP changes. All companies will be impacted by the GAAP (Generally Accepted Accounting Principles) changes, perhaps with public companies feeling it the most. Due to this, all current finance and accounting personnel in companies, (and people looking to secure jobs in these sectors), especially public companies, must be aware of the changes and understand their direct impact on a company’s financial projections.

Origin of Changes

As explained in FASB’s (Financial Accounting Standards Board) Release Notes of the Proposed U.S. GAAP Financial Reporting Taxonomy, the US GAAP is under the purview of The Financial Accounting Foundation (FAF) and the FASB. Each year there is an opportunity to be part of a public review of the GAAP during certain time frames and once it is in its final form, it is put to use by the US Securities and Exchange Commission (SEC).

Implementation Dates

Brett Cohen, Partner, and David Morgan, Senior Manager at PwC detail the varying dates of implementation based on company type. Because the GAAP changes will be so impactful and arduous to put into practice, an optional deferral date was given by the FASB. For public companies, “the proposed deferral would result in the new revenue standard being effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017.” For nonpublic companies, the implementation would begin on December 15, 2018 and December 15, 2019 for “interim periods within fiscal years.”

The deferral date for public companies is already upon us and has presumably been top of mind for the last year within finance departments. For nonpublic companies, the upcoming year or two will be marked with trying to navigate these changes and doing the heavy lifting in terms of drafting a road map for finance and accounting employees moving forward.

Top New Standards

Denise Lugo of Bloomberg has listed and described the top new standards that will be affecting company’s financial statements:

  1. Revenue
  2. Employee Share-Based Payment Accounting
  3. Cash Flows
  4. Simplifying Measurement of Inventory
  5. Classifying Deferred Taxes.

Lugo explains that for #1: Revenue, it correlates to ASC 606 (Revenue from Contracts with Customers) and promises to be “one of the biggest overhauls in financial reporting” and should be taken seriously as it will go into effect in 2018. This standard “requires a five-step process for customer-contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards…companies are required to provide enhanced disclosures that focus on the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.”

#2: Employee Share-Based Payment Accounting is described by Bloomberg as “making it easier to account for stock forfeitures-losses-because they can be accounted for when they occur instead of having to estimate them…it also liberalizes classification of stock compensation awards for tax withholdings and allows a company to withhold the maximum instead of limiting it to the minimum statutory rate.” This is important as the net income of companies may be affected.

The goal of #3: Cash Flows is to “provide clarity for companies on whether an item should be categorized as operating, financing or investing.” Lugo notes that this factor has not previously been included in GAAP.

Simplifying Measurement of Inventory, standard #4, changes “the measurement principle for inventory from lower of cost or market value to lower of cost and net realizable value.” This will affect companies that sell products and sometimes discontinue products.

The revision to #5: Classifying Deferred Taxes is in the interest of simplicity and efficiency as it “requires companies to classify all their deferred taxes as noncurrent instead of having to go through more complex calculations to determine what is going to happen within the year and what happens after that.”

Changing Taxonomy

In their Release Notes, the FASB compared changes to prior years, and from 2017 to 2018, there was a decrease in new elements and the definition changes and deprecated elements stayed relatively the same, though slightly increased.

The FASB noted that all the GAAP changes were done in the interest of stability and simplification.

The Way Forward: Two Methods

Bradley C. Brasser, Rory T. Hood, Joel T. May and W. Stuart Ogg of Jones Day discuss in detail for Lexology the ramifications and necessary considerations for companies as they grapple with their upcoming first financial reporting of 2018 Q1 under the new GAAP.

Brasser et. al. explains the two methods possible for financial disclosure reports:

  1. Full Retrospective Method: “involves recasting prior periods revenue and expenses to reflect the effects of the new standards;”
  2. Modified Retrospective Method: “will apply the new standard to all contracts entered into after the adoption date and involve an opening balance sheet adjustment for the period for prior contracts with remaining obligations.”

Whichever method is chosen, the earnings described in public companies’ annual and interim reports will be greatly impacted, as this Jones Day team has made clear.

Unsure Footing

Even though these changes have been in the works since 2014, many public companies are still very much in the process of studying the new standards as they relate to their financial bottom line and disclosure practices. The new GAAP will impact companies very differently depending on their size, financial state, etc.

This was seen in disclosure reports made over the summer, specifically with Microsoft and Apple. Lexology included both disclosure statements and Apple was brief and a bit vague regarding the implications of the new standards and Microsoft was more specific and divulging, making mention of specific numbers.

As time passes in 2018 and more public disclosure reports are released from public companies, it will become apparent which method of reporting was chosen and what challenges were faced in doing so.

Historic Changes

Companies, especially public companies that report financial earnings and disclosures, are being affected by “the most historic accounting changes to hit U.S. capital markets in decades,” explains Bloomberg’s Lugo. She highlighted that of the changes, what will be affected are “reporting of revenue streams, balance sheets and net income” and are “likely to roil earnings reports.”

What Employers and Employees Should Do

Also in Bloomberg, Neri Bukspan, a Partner with Ernst & Young in their Financial Accounting Advisory Services division, explained that “companies should also consider creating another, more robust, plain-English articulation to the market about what the changes are. The disclosure should include their effects on company results and comparability.”

It is important for companies to articulate these changes in layman’s terms and make correlations to their specific company since the changes are complex and far-reaching.

This is exactly what Annette Messler has and is doing for Friedman Williams. In leading the internal accounting team of Friedman Williams, Annette works closely with her tax accountants for updates and changes relating specifically to the accounting of our recruiting firm. As with her additional clients, when pertinent updates and or changes come along, she assesses the impacts and delivers what the effects will be to the affected client(s). While Annette doesn’t anticipate an impact for Friedman Williams directly, she explained that there is further research and conversations to be had in order to fully understand the scope of the new GAAP standards.

Adam Brown, BDO USA LLP’s Partner and National Director of Accounting told Bloomberg that “companies should talk to their investor relations team or mention the issue on analysts’ calls where the issue would be noticed so that it can be factored in.”

Keeping the key players in the loop regarding the financial health and reporting of a public company is essential, especially in this time of transition and change.

PwC published the article “New accounting guidance creates volatility in effective tax rates” in which they explain the crucial role corporate tax directors will play during the new GAAP implementation. PwC explains that “over the course of the next two years, companies will need to institute incremental processes to attempt to forecast the impact of stock option exercises…or income tax expense…or potential intercompany asset sales.”

Corporate tax directors play a large role in these forecasts and candidates looking to secure such a position need to educate themselves on how this role will be impacted by the implementation process of these new GAAP standards.

PwC went on to state that “companies with significant stock-based compensation programs will likely experience greater income tax expense volatility, as well as a meaningful impact on net income and earnings per share.”

Companies and those employees that work to design compensation packages should be mindful of this volatility as it affects the recipient as well as company financial forecasts.

Brasser et, al. of Jones Day explains in multiple instances of why it is imperative to involve all key employees in the process of implementing these standards.

They pointed out that the SEC has “publicly encouraged companies to provide transition disclosures to investors about the effects of the New GAAP.” This is largely due to the SEC viewing the new standards as being very impactful on disclosure issues and key stakeholders shouldn’t be surprised on how their company will be affected.

Furthermore, “…is the need to involve the audit committee in the process and to ensure that the SAB 74 disclosures are subject to effective internal control over financial reporting…” The SAB 74 (Staff Accounting Bulletin 74) disclosures reference the necessity of reporting how the new GAAP will affect the financial statements of the company.

The general main theme of the suggestions for employees and companies is to be proactive in informing the necessary people of the effects of the new GAAP standards so there are no surprises in how the company’s finances will be affected.

For people looking to elevate their careers within the accounting and financial sector, it would be wise and imperative to become educated on the new GAAP standards.



Brasser, Bradley C. et al. “Are You Ready For “New GAAP” Revenue Recognition? SEC Disclosure Considerations.” Jones Day, 16 Nov. 2017. <;

Cohen, Brett and Morgan, David. “FASB Proposes One Year Deferral of New Revenue Standard.” PwC, 16 Nov. 2017. <;

Lugo, Denise. “New Accounting Rules Spell Big Changes for Public Companies.” Bloomberg BNA, 16 Nov. 2017. <;

Messler, Annette. Personal interview. 27 Nov. 2017.

“New Accounting Guidance Creates Volatility in Effective Tax Rates.” PwC, 16 Nov. 2017. <;

“Proposed U.S. GAAP Financial Reporting Taxonomy Release Notes.” Financial Accounting Standards Board, 16 Nov. 2017. <;



Ace That Interview

Whether you are pounding the pavement for a new job and/or career change or just want to brush up on your interview skills, Friedman Williams believes that preparation for an interview, whether in-person or via phone, can exponentially increase your chances of moving on to the next step in the hiring process.

How to Prepare Beforehand:

  • Fully read and absorb key content on the company’s website, including:
    • Office locations and ballpark number of employees
    • Names and titles of senior management
    • Names, titles, and background of people you will be interviewing with (including their LinkedIn page!)
    • Mission Statement
    • Company history
    • Recent important news, press releases and/or events
  • Have fresh copies of your resume and any other requested documents
  • Reflect and refresh yourself on your job history and experiences. Have examples prepared of your ability to overcome adversity, work independently and in a team environment, and specific ways your skills and experience match the job
  • Refresh yourself on what your day-to-day is like in your current job and what you are truly an expert in (could be technical skills as well as situational)
  • Have a compelling and sincere reason as to why you want this position at this company. The hiring manager will respond to personality, energy and motivation as much as how technically able you are.
  • Prepare a few questions so you come across as engaged and interested in both the role and company.

Day-Of Essentials

  • Have your resume and any other requested documents with or in front of you
  • Wear a suit, even if it is a phone interview. This will make you feel more confident and in turn your speech and language will come across at a higher level than if you were sitting on your couch in sweatpants.
  • Do not arrive more than 5-10 minutes before the interview and treat everyone you meet with a friendly demeanor. You never know if the hiring manager(s) will ask the receptionist his/her opinion of you or how you behaved.
  • Great the hiring manager with a smile and firm handshake. If a phone interview, smile and answer “This is {your name}.”
  • Answer every question to the best of your ability and do your best to let your personality, ambition, motivation and technical skills match you to the role and company.

 Make Your Impression A Lasting One

  • Follow up with a thank you note for each person you met during your interview. Reiterate your interest in the position and company and why you see yourself successful in their culture and environment.