Lease accounting for the industrial manufacturing industry will change under the new standards. A wide variety of companies lease industrial manufacturing space, from automotive to technology companies.
The new leasing standards will require these 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.
1. Is a contract for manufacturing vehicle parts treated as a lease by the vehicle company under the new standards? Consider whether or not the vehicle company obtains substantially all of the economic benefits from use of the manufacturing line.
2. What role does customizability play in determining whether the contract contains a lease under the new standard? Consider the manufacturing of specific vehicle, technology, or construction parts.
3. How are leases that contain multiple components and purchasing options valued under the new lease standards? Consider provisions for minimum volume and subsequent variable payments.