Lease Capitalization - How Lease Capitalization Impacts Borrower Leverage, Liquidity, Profitability, and Repayment Ability
Generally accepted accounting principles (GAAP) do not change often, but when they do, we need to understand how changes in GAAP effects borrowers’ and clients’ ability to repay. GAAP now requires that companies capitalize their leases, and that may worsen their leverage, reduce their liquidity, lower their profitability, and reduce their ability to repay.This webinar will explain why lease capitalization of both operating leases and financing leases will impact the financial condition and performance of borrowers.Learning Objectives Learn the key elements of the lease capitalization GAAPExplain how lease capitalization will put both the lease liability and the right-of-use asset on the borrower’s balance sheetOffer guidance on what items of financial condition and performance will be most impacted and tips on how to underwrite borrowers and advise clients under this new GAAPAreas Covered Lease capitalization - Implementation date - Elements of capitalization - capitalization rate, amortization, right-of-use asset, lease liability - Operating leases and financing leasesAnalysis and underwriting - Ratio covenants most sensitive - leverage ratio, current ratio - Lease cap’s impact on liquidity, leverage, solvency, and profitabilityPortfolio management - Identification of industries and borrowers most sensitive to lease cap - Review and restructuring as needed of loans with financial covenants affected by lease capWho Should AttendCredit policy managersCredit managersCredit Risk Managers Credit approval officersRisk ManagersEnterprise Risk ManagersChief Credit OfficersSenior LendersSenior Lending Officer Bank DirectorChief Executive Officer Bank PresidentBoard Chairman
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Generally accepted accounting principles (GAAP) do not change often, but when they do, we need to understand how changes in GAAP effects borrowers’ and clients’ ability to repay. GAAP now requires that companies capitalize their leases, and that may worsen their leverage, reduce their liquidity, lower their profitability, and reduce their ability to repay.
This webinar will explain why lease capitalization of both operating leases and financing leases will impact the financial condition and performance of borrowers.
Learning Objectives
Learn the key elements of the lease capitalization GAAP
- Explain how lease capitalization will put both the lease liability and the right-of-use asset on the borrower’s balance sheet
- Offer guidance on what items of financial condition and performance will be most impacted and tips on how to underwrite borrowers and advise clients under this new GAAP
Areas Covered
- Lease capitalization
- Implementation date
- Elements of capitalization - capitalization rate, amortization, right-of-use asset, lease liability
- Operating leases and financing leases - Analysis and underwriting
- Ratio covenants most sensitive - leverage ratio, current ratio
- Lease cap’s impact on liquidity, leverage, solvency, and profitability - Portfolio management
- Identification of industries and borrowers most sensitive to lease cap
- Review and restructuring as needed of loans with financial covenants affected by lease cap
Who Should Attend
- Credit policy managers
- Credit managers
- Credit Risk Managers
- Credit approval officers
- Risk Managers
- Enterprise Risk Managers
- Chief Credit Officers
- Senior Lenders
- Senior Lending Officer
- Bank Director
- Chief Executive Officer
- Bank President
- Board Chairman
