GLOBAL HEALTHCARE SERVICES

NEWMARK KNIGHT FRANK

Balance Sheet Liabilities Jumped After Lease Accounting Change

Article commentary by: Jay Miele, Senior Managing Director, Global Healthcare Services

A recent article in Accounting Today highlighted the magnitude of balance sheet impact that the lease accounting changes (codified in ASC 842) are having on companies’ balance sheets. Chief among the myriad of changes is the capitalization of operating leases longer than one year on the balance sheet as lease liabilities. Previously, only finance leases (formerly termed capital leases) were reflected on the balance sheet. In the healthcare industry, the average lease liability increased 1,817% as a result of the change. This impact, together with the complicated and arduous implementation process of identifying and recognizing leases, are leading healthcare providers to revisit their own vs. lease decision tree for real estate and equipment, as well as consider alternative financing strategies.

Article written by: Michael Cohn, Accounting Today, February 18, 2020

The new lease accounting standard caused lease liabilities for the average company to increase a whopping 1,475 percent, skyrocketing from $4.4 million before the transition to $68.9 million post transition, as operating leases were recorded on the balance sheet for the first time, according to a new study... Read the full article here.

temp-post-image

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of Newmark Knight Frank. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient's choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of Newmark Knight Frank, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains. This document is intended for informational purposes only and none of the content is intended to advise or otherwise recommend a specific strategy. It is not to be relied upon in any way to predict market movement, investment in securities, transactions, investment strategies or any other matter.

Download Our
Brochure

Sign Up for Our Newsletter

COVID-19 HeaTHCARE REAL ESTATE UPDATE