Several things in life give us headaches. Stress. Loud noises. Eating too much ice cream. Extended visits from the in-laws. You get the idea.
When it comes to commercial real estate professionals, however, recent FASB accounting standards updates can have you envisioning the worst migraine of all time on the horizon. (Specifically, late 2018 or early 2019, depending on the type of your organization.) You’re likely asking yourself, “Will FASB cause me headaches with my lease administration?” The answer depends on how you’re doing it.
The Lease Administration Impact of FASB
If you haven’t read about FASB basics, do it now. (Yes, now.) They have several impacts on the lease administration aspect of commercial property management. If you don’t feel like reading through the countless updates on the official FASB website, that’s fine; we get it. Here’s a quick breakdown of the most important changes that could potentially cause you headaches:
- The FASB impact on lease terms: CRE professionals enjoy the stability that comes with long-term leases, but FASB updates incentivize leases that are less than 12 months, as they reduce the impact of long lease value on a company’s debt-to-income ratio.
- The FASB impact on time: As every CRE professional knows, negotiations take time and FASB updates increase the likelihood of more frequent renewal negotiations. Your client will likely also have several questions about things like provisions, limitations and other FASB-related aspects of their individual contract.
- The FASB impact on balance sheets: Gone are the days when companies could simply record the impact of a lease payment as an expense item. Now, the complexity of lease terms dictate how payments are recorded on a balance sheet, which translates to more complex documentation and reporting for CRE professionals.
Fortunately, the right real estate automation software can help soothe the effects of these FASB headaches — and even prevent them from happening in the first place.
How Real Estate Automation Helps with Lease Administration
If your lease obligations go beyond that 12-month threshold, it dramatically increases the complexity of your tenants’ accounting methods. That can make it difficult to sell lease terms for multiple years, unless you have the right tools in place. With Quarem’s Access and Vantage software platforms, you can stay on top of critical dates and options, even receiving reminders when things like renewals and expirations are around the corner. Quarem’s lease tracking capabilities give you unparalleled insight into your current and prospective tenants’ contracts.
If you’d like to learn more about how Quarem can help ease the lease administration headaches caused by FASB changes, contact us today.