BDO Teams with CoStar on Lease Accounting

BDO USA LLP is partnering with CoStar Group’s CoStar Real Estate Manager division to advise companies on complying with the lease accounting standard.

The Financial Accounting Standards Board released a long-awaited lease accounting standard in February (see FASB Releases Lease Accounting Standard). It had been working to converge the standards with the International Accounting Standards Board for nearly a decade, but the IASB released a somewhat different version in January for International Financial Reporting Standards (see IASB Releases Lease Accounting Standard).

The new standards require companies to recognize nearly all obligations for real estate, equipment and other leased assets on their balance sheets. Data from the Securities and Exchange Commission indicates that Fortune 500 companies now have over $700 billion in off-balance sheet lease obligations that will be affected by the new standards, while the IASB projects new balance sheet additions worldwide could exceed of $3 trillion.

The alliance between BDO and CoStar aims to help business cope with the new standards in areas such as debt covenants and financial ratios.

“We are extremely pleased to work with CoStar in helping clients meet the challenge of complying with the new lease accounting rules,” said BDO USA national assurance partner Mike Stevenson in a statement. “Although the standards do not take effect until after December of 2018 for public companies and after December 2019 for private entities, organizations must present prior periods on their financial statements and will need to adjust balance sheets retroactively for a period of two years before the effective date.”

CoStar offers Lease Manager online software to help businesses manage and report on real estate, equipment and other leased assets. The system helps companies figure the impact on their balance sheet from the new standard, perform classification tests, handle amortization schedules, process journal entries and integrate with their general ledger systems. To comply with Sarbanes-Oxley requirements for testing internal controls over financial reporting, CoStar’s platform completes an SSAE 16 audit annually.

“As a premier national accounting firm serving major multinationals, middle-market companies, and emerging businesses, BDO is an ideal partner for our lease accounting solution,” said Andy Thomas, president of the CoStar Real Estate Manager division, in a statement. “Leading-edge tools are only as good as the people who use them.”