Real Estate Impact Huge Under Accounting Changes

This is a feature article from Globe St. on the ongoing debate of how corporate America and the individual investor are going to be affected by the “mark to market” FAS change.  FAS 157 has many implications for a lessor and lessee, thanks Uncle Sam.  Good cursory knowledge for the possible changes on the horizon.-Sean

LOS ANGELES-New accounting standards requiring property to be marked to market and proposed changes in lease accounting rules could have an immense impact on the balance sheets, income statements and overall financial outlook of US corporations, many of whom are unprepared for the changes, according to a new report from CB Richard Ellis.

The white paper by CBRE, titled “FAS Talking–Unpacking Real Estate’s Impact on Financial Statements,” says that the estimated balance sheet impact of the proposed lease accounting changes alone could be well in excess of $1 trillion for US companies. The report says that the combined effects of mark-to-market and the lease accounting changes hold the potential to negatively impact earnings, capital requirements, debt covenant ratios, credit ratings and other measurements of corporate financial health.

Todd P. Anderson, CBRE senior managing director of global corporate services who co-authored the report along with CFO Michael M. Omiya of Boeing Realty Corp., explains to GlobeSt.com that the changes in accounting standards are “a continuation of the effort to have generic drugs without prescription greater financial transparency, in particular in the financial statements for publicly traded corporations.”

The white paper analyzes the potential impacts of both the mark-to-market requirement and the proposed lease accounting changes–which could go into effect as early as 2011 or 2012–and discusses courses that corporations can purse in order to mitigate the effects of the changes. The mark-to-market requirement, known as FAS 157, went into effect for financial assets as of Nov. 15, 2007 and for non-financial assets including real estate as of Nov. 15, 2008…..

To read the whole story go to Globe Street.