iLease Management LLC has been providing insightful research and recommended approaches into the proposed lease accounting changes for over two years. This presentation dives into not only how the proposed FASB and IASB lease accounting changes will impact organizations but shows how, at the functional level, what questions need to be considered in order to comply with these upcoming standard changes. We outline the functional areas like Corporate, Finance, Treasury, Human Resource and Technology. And given the resource limitations within most organizations, we show how the lease accounting changes will present “Opportunities for Assistance” for Certified Public Accountants (“CPAs”) that are looking for ways to add value to their client relationships. This presentation explains how CPAs can position themselves to be proactive and provide technology and services that are of critical importance to their clients.

1. A Call to Action for CPAs -
Confronting the Lease Accounting Changes
A Proactive Approach to Providing an End-to-End Solution
to Add Value for Your Clients

2. Contents
Executive Summary
Introduction
Financial Impact and Corporate Readiness
Adding Value for Your Clients
Business Opportunity
Current Status of the Changes
Recommended Next Steps
About the Author
About iLeasePro

3. Executive Summary
iLease Management LLC has been providing insightful research and
recommended approaches into the proposed lease accounting changes for over
two years. This presentation dives into not only how the proposed FASB and IASB
lease accounting changes will impact organizations but shows how, at the
functional level, what questions need to be considered in order to comply with
these upcoming standard changes. We outline the functional areas like
Corporate, Finance, Treasury, Human Resource and Technology. And given the
resource limitations within most organizations, we show how the lease
accounting changes will present “Opportunities for Assistance” for Certified
Public Accountants (“CPAs”) that are looking for ways to add value to their client
relationships.
This presentation explains how CPAs can position themselves to be proactive and
provide technology and services that are of critical importance to their clients.

4. Introduction
Lease accounting, particularly as it relates to lessee accounting, will
change significantly under current proposals put forth in a Joint Project
between the Financial Accounting Standards Board (“FASB”) and the
International Accounting Standards Board (“IASB”). There are a number of
issues addressed in the Joint Project but the major point of contention
concerns current standards for operating lease accounting. The fact that a
lessee under current generally accepted accounting principles (“GAAP”)
can execute a contract to make legally binding payments over a period of
time, structure the contract so that it is classified as an operating lease
and not be required to reflect that obligation as a liability on the balance
sheet has been a source of controversy for both financial regulators and
analysts.
The FASB and the IASB began to tackle this issue in 2009 by issuing a Preliminary Views topic paper which was followed by Exposure
Draft in August 2010 (‘the 2010 ED”) which proposed major changes to the manner in which leases are accounted for. The 2010 ED
sparked numerous comments and a lively debate among financial statement preparers because of the perceived additional complexity
that the proposed changes would entail. The FASB and the IASB (“the Boards”) undertook significant outreach to the financial statement
preparer and user communities and in May 2013 issued a revision to the Exposure Draft (“the Revised ED”) which eliminates some of
the more complex provisions but retained most of the basic elements of the 2010 ED.
The Boards continue to deliberate and further changes are expected to be made to the Revised ED in an attempt to eliminate additional
complexities. However, one thing is clear – the vast majority of lease obligations will have to be recorded on the balance sheets of
lessees and the adoption of the final standard will entail significant time and effort.

5. Financial Impact and Corporate Readiness
The financial impact of the proposed change will be
worldwide since this is a joint IASB/FASB proposal and
will affect all industries & firms that lease equipment
and/or real estate. Implementation of the proposed
standard will be a heavy administrative burden on the
companies affected since they will have to collect and
input a substantial amount of data, perform complex
calculations to determine the amount to be
capitalized, monitor and continually reassess each
active lease.

6. Financial Impact and Corporate Readiness
90% indicate that they are not prepared for implementation of the new standard
65% expect a significant level of impact on organizations
60% have a major concern regarding readiness of technology systems
Companies all over the world must understand these
new rules, develop new processes and either modify
existing or acquire new technology to comply. A
particularly pertinent finding from the PWC Survey
indicates that 60% of the respondents currently have
lease information on spreadsheets. It is likely that firms
will need to migrate lease information off of
spreadsheets and into applications that have been
designed to perform the complex calculations that will
be required for the changes.
PWC Lease Accounting Survey of over 1,400 Fortune 500 respondents

7. Financial Impact on Lessees
Financial Impact on Lessees
• Credit Suisse estimated that off-balance sheet
liability just for S&P companies is at least $549 Billion
(Deloitte Survey).
• Debt to equity ratios, existing debt covenants and
various contractual agreements will be significantly
impacted.
• For those companies with significant equipment lease portfolios, the pattern
of expense recognition will be dramatically accelerated.
• Income tax calculations will become more complicated and financial
statement disclosure will greatly expand.
• Costs of implementation will be significant.

8. Operational Impact on Lessees
• Likely that the accounting for existing leases will have to be revised upon transition.
• No leases will be grandfathered. Existing leases will likely require abstracting of lease details.
• Complexity of lease calculations will increase as more variables will have to be considered.
• Data will require aggregation from various sources not currently considered.
• More estimates and judgments will be required which will entail tighter auditing and tracking.
• There will be an ongoing need to review, reassess and possibly revise initial estimates.

9. Opportunity
Because of the extended period of deliberation about this issue, surveys have
indicated that many in the lessee community have not focused attention on this issue
and are not prepared for this change. The scope of the impending changes will be
enormous and will involve many constituencies within the organization.
• All active leases existing at the time of adoption will have to be transitioned over to
the new accounting method
• Policies and procedures will have to be reevaluated and possibly revised
• Technology systems will have to be reassessed
• Revised Lease strategy may be required
And these are only a few of the issues that must be addressed, but it is clear that
significant effort will be required to fully comply.

10. Adding Value for your Clients
Given the resource limitations at most organizations, all of these issues present a
challenge and an opportunity for the Certified Public Accountants (“CPAs”) that
are looking for ways to add value to the client relationship.
How can CPAs position themselves to provide services that are of critical
importance to their clients?
Perhaps the best way to exhibit possible
service opportunities is to look at the following
functional areas of potential issues that
organizations will have to consider as part of
the transition and how you as a CPA can
provide assistance in helping your clients cope
with the issues that must be addressed.

11. Corporate Governance
• Roles and Responsibilities
• Governance/Controls
• Lease Accounting Changes
• Internal Audit
• Internal Communication
• Tax Implications
• Global Operations
POTENTIAL CHANGES REQUIRED

12. Opportunity to Add Value
• Assistance can be provided in the review of Policies
and Procedures.
• Provide general consultation in interpreting the more
complex provisions of the new accounting standard.
• Work closely with Internal Audit to develop the
Internal Audit Plan for review of the accounting
change.
• Provide significant assistance in the review of the
income and franchise tax implications.
Corporate Governance

13. Finance / Treasury
• Investor Communication
• Contract Administration
• Loan Covenants
• Ongoing Leasing Strategy
• Budget and Forecasting
• Performance Metrics
• Financial Reporting
• Capital Requirements

14. Opportunity to Add Value
• Provide assistance in collecting and abstracting lease
information.
• Assist in the review of revised performance metrics
and financial covenant calculations.
• Review and assist with the revised budgeting
implications.
• Consult on the required revisions to the financial
reporting.
Finance / Treasury

15. Technology
• System Evaluation and Assessment
• Accounting System
• Reporting Systems
• Lease Management and Accounting
• Contact Management
• Document Management
• Infrastructure

16. Opportunity to Add Value
• Assist in the evaluation of technology alternatives.
• Provide feedback to management for possible
systems alternatives being considered.
• Consider providing an outsourced, cloud-based
technology solution.
Technology

17. Human Resources
• Resource Availability & Skill
Level
• Outsourcing
• Compensation Plans
• Training

18. Opportunity to Add Value
• Loan staff can be provided to supplement existing
resources and assist with data gathering and data
input.
• Work as an advisor to the Implementation Task Force
to ensure that all required tasks are identified.
Human Resource

19. Current Status
In the June 2014 meeting, the Boards decided that a sublease where a lessee subleases its space and then
becomes a lessor would be accounted for as two separate lease contracts, except in certain instances where the
contracts were entered into at or near the same time. But the different approach mentioned in the previous
paragraph will impact the specific accounting for the sublease.
The Boards also discussed the balance sheet presentation for the right-of-use asset and the lease liability and
basically concluded that they would either be presented on the face of the balance sheet or disclosed in the
footnotes to the financial statements. The FASB also determined that the Type A lease liabilities would be
presented separately from Type B lease liabilities.
There are several other issues that will be discussed in future meetings, however, the list of open items continues
to get much shorter. The standards are expected to be finalized by the end of 2014 or early 2015.
The FASB and the IASB (“the Boards) continue discussing the Joint Project on Lease
Accounting. In the latest meeting, converged decisions were reached on a number of
issues but the Boards also reached different decisions on certain matters.
A fundamental difference between the two Boards continues to impact many of the
deliberations. The FASB has tentatively decided that there will be two types of
leases, Type A and Type B, depending on the nature of the underlying asset and the
extent of the lease term. The IASB is pursuing a single accounting model for all
leases. This difference will impact the expense recognition pattern for certain leases.
Both Boards continue to discuss an exemption for short term or small ticket leases.

20. Recommended Next Steps
Given the delays in completion of the leasing project and
an uncertain implementation date, it is easy to become
complacent in preparing for the changes that are sure to
come. However, although the final effective date may be
a few years in the future, the transition will entail
significant effort.
CPAs should begin now to engage their clients to discuss how the required tasks are to
be accomplished. And work with your client to develop and participate in a transition
team to begin answering the questions presented above. Several of these tasks can be
started now to mitigate the risks that will increase as we move closer to the finalization
of the standards. By bringing together a task force, your client can begin developing an
implementation plan that will help in identifying the functional areas within the
organization that will be impacted and how these issues will be addressed.

21. Whitepaper
Download the full whitepaper A Call to
Action for CPAs - Confronting the Lease
Accounting Changes

22. Business Opportunity
How can iLeasePro help you add value
for your clients?
With the complexity of the change
requirements, specifically the data
aggregation of multiple leases and
ongoing reassessment requirements, we
at iLease believe that companies will find
the transition challenging and will look
for an enhanced technology solution that
can provide operating efficiencies.
Additionally, given the delays in
completion of the leasing project and an
uncertain implementation date, many
companies will require assistance from
their financial advisers in order to
compile the information and perform the
required calculations.

23. Business Opportunity
iLease believes that there is a very meaningful partnership that can be developed between
iLeasePro and the CPA community. We have been actively following the progress of the proposed
lease accounting changes and have been posting guidance on our Blog with a view toward
developing an accounting technology component that will allow users to meet the requirements of
the proposed standard.
stegan@ileasepro.com
www.iLeasePro.com
However, simply meeting the new
accounting requirements is not what
companies should be exclusively
focused upon. Our accounting
component is being developed as part
of an overall Lease Analysis, Lease
Management and Lease Accounting
solution that would allow the users to
drive efficiency to the overall lease
portfolio through a cost effective
technology solution.
Interested in Partnership
Get in Touch with Us

24. About the Author
Sean T. Egan is Co-Founder and Managing Partner of iLease Management LLC,
the developer of iLeasePro. Mr. Egan retired from the accounting and
advisory firm of KPMG LLP after having spent 35 years with the firm as a
partner providing audit and advisory services to the financial services
industry. In 2012, Mr. Egan founded iLease Management LLC along with Co-
Founder and Managing Partner, John Meedzan.
iLease Management LLC
Boston, MA
http://www.iLeasePro.com
Sean T Egan, Managing Partner
stegan@ileasepro.com
John J Meedzan, Managing Partner
jmeedzan@ileasepro.com
Making It Easier To Manage the Entire Real Estate and Equipment Lease Lifecycle

25. About iLeasePro
The Management of iLeasePro is committed to keeping our constituents abreast of the status of the leasing project and
operational issues that will result from these changes. Although significant changes to accounting such as these will undoubtedly
be time consuming and disruptive, we believe that implementation of these changes should be viewed not just from an
accounting perspective but as a way for the overall organization to become more efficient. That is why, in designing iLeasePro, we
did not simply look at the project from an accounting perspective. In iLeasePro, we have a Lease Management technology
solution that is able to capture all the key data related to the lease portfolio in one central location easily accessible to all those
who have need of this information. Critical dates can be flagged so that there is never a reason to miss lease expirations or
extensions or an insurance renewal. Lease related documents can be stored electronically for easy access and reference. Contact
information regarding key personnel related to the lease can be readily accessed in our Contacts section. And these are only a few
features of our Lease Management solution.
Additionally, our Lease Analysis solution is fully integrated with Lease
Management. We understand that a technology solution is a critical
element of the entire lease cycle, not just after a lease is executed.
Lease Analysis allows the user to perform a side by side comparison of
various leasing options and provides the user with the critical analytics
to make an informed decision about the best alternative for the
organization. Once the proposed lease accounting standard has been
finalized, we are ready to integrate our Lease Accounting technology
solution into iLeasePro to complete a comprehensive and fully
integrated Lease Analysis, Management and Accounting solution.
For additional information about iLeasePro and for details as to how
you can become a Beta tester of this exciting new product, please go
to our website at http://ileasepro.com.