Are pending changes in lease accounting helping the migration to the cloud for many businesses? Cloud computing usage continues to spread like a virus in 2012. But some of the source behind this migration to the cloud may be coming from the accounting department.
Operating leases are not reported on company balance sheets. Rather, many times leases will appear in the footnotes of company financial reports. Until now, only outright equipment purchases needed to appear on the financial statements. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have proposed changes that will require companies to reflect leases on balance sheets.
This change in how equipment leases get expensed can have a dramatic effect on the bottom line for an organization. The draft of this proposal is expected this month (April 2012) followed by a 120 day comment period.
Your organization needs to exercise good cash flow management, while providing the most robust technical solutions for your employees, team members, clients and end-users. At Roan Solutions, we work with organizations and businesses in the Boston area to optimize your technology needs — without busting the budget.
This new proposed accounting change may require organizations to reexamine the benefit to leasing (or buying) on-site equipment or whether it may be an opportune time to examine whether a cloud-based solution is a possibility.
“There are many benefits to leasing, and the primary reasons to lease equipment will remain intact under the lease accounting proposals, from maintaining cash flow, to preserving capital, to obtaining flexible financial solutions, to avoiding obsolescence,” said ELFA chairman Crit DeMent, chairman and CEO of LEAF Commercial Capital Inc. “However, the financial burdens imposed by the standards under consideration are the last thing American businesses already struggling to regain their footing in a challenging economic landscape need. We urge the Boards to reconsider some of the more onerous and burdensome proposals under consideration to minimize the negative financial impact on businesses.”
Roan Solutions can accommodate businesses and organizations that may be scrutinizing the impact of including leases for technology equipment on the financial statements. It’s imperative your organization remain fully cognizant of the options available. Leasing your technology equipment may or may not be the right solution for your team. This may be the appropriate time to take a look at whether cloud computing may be a better solution for your organization. You can reach us at (617) 799-8922 if you would like to discuss in more detail.