Lease accounting for the financial services industry will change under the new standards. The financial services industry tends to lease a variety of assets that may include bank branch buildings, office space, and outsourced technology operations.
The new leasing standards will require financial services and insurance companies to update their accounting policies based on the new principles. In some cases, extensive analysis may be required to arrive at judgments on how to apply the standards to certain lease types.
Key Considerations
1. Does outsourced data storage qualify as a lease? Consider whether or not the data centers are customized to fit specific company needs.
2. What arrangements might qualify as on-balance sheet leases under the new accounting standards? Consider not only real estate leases like office buildings, but also equipment leases.
3. How are lease and non-lease components separated in a contract? For example, consider how a requirement for office space maintenance could be considered non-lease, but the office space itself might be considered a lease.
What the Experts Think
Links to Additional Resources
Financial Services
How the FASB’s new leases standard will affect financial services entities
In their "Technical Line" publication, EY explains the implications of FASB's new lease accounting standards on the financial services industry and how companies can prepare for them in 2019.
Applying IFRS in Financial Services: IASB issues new leases standard - financial services
In their "Applying IFRS" series, EY describes what changes are to come for the financial services industry with the implementation of ASC 842 and details how they can prepare for its effects.
Financial services industry lease accounting change: impacts and actions
In this webcast, PwC looks at how the financial services industry will be affected by the new lease accounting standard, and shares insights on how organizations can prepare.
Insurance
In depth: Insurance industry supplement to leasing standard
PwC details the impacts of the new lease accounting standards on insurance companies, such as the changes to the lessee accounting model and lease modifications, as well as how the industry can prepare.
New lease accounting standard: potential consequences of FASB Leases (ASC 842) for portfolio companies
In this publication, PwC explains how FASB's new lease accounting standards will affect the private equity sector on areas such as metrics, covenants, and more.
