SEC staff views on EBITDA under ASC 842 and IFRS 16 “The staff would continue to object to a non-GAAP measure presented by a U.S. GAAP registrant that adjusts EBITDA to add back any operating lease expense since it is not recorded as ‘depreciation’ or interest under ASC 842… Sale leaseback accounting has changed. ; If a contract contains multiple components, the entity shall determine how to classify each component separately. 1 The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. How we can assist you in your IFRS 16 or ASC 842 implementation. It’s important to communicate the impacts of ASC 842 to all stakeholders within a company, and not just within the corporate accounting department. January 1st 2019 is the effective date of the new leasing standard IFRS 16. This is the second post in our series on ASC 842, Leases. For public entities, ASC 842 will go into effect for the annual period beginning after December 15, 2018, and calendar year 2019. Both assets and financial liabilities on the balance sheets of lessees will increase as a result of these changes. The standard requires material lease contracts to be presented on-balance to allow for a more representative overview of debt and financial leverage. Finance Read the first, third and fourth posts here. For Lessees: All major leases recognized on balance sheet. See how LeaseAccelerator can help. ASC 842 & IFRS 16 impact financial metrics including return on assets, EBITDA, & debt ratio + balance sheet & income statement. Overview of New Lease Accounting Standard – Impact on the Retail Industry Accounting Standards Update 2016-02 ASC 842 Leases . 4 FASB ASC 842 Lease Accounting Handbook would drop lease classification and apply what we now know as capital lease accounting, which the Boards refer to as “finance lease accounting—note the name change, to all leases with a term of more than 12 months and leases of small (meaning low value) items can be exempted from capitalization . ASC 842 treats leases in a similar way, except that the costs of operating leases are captured in a single expense item in operating costs rather than through depreciation and interest expenses. ASC 842 requires both lessors and lessees to determine the classification of all leases at the commencement of the lease. ; The commencement date would be the date when the lessor makes the underlying asset available for the lessees use. For other entities, ASC 842 goes into effect for fiscal years beginning after December 15, 2021 (i.e., will be effective for calendar year-end companies on January 1, 2022.) New criteria for identifying a lease ―Single model (IFRS) ―Dual model (US) ―“Right-of-use” asset, lease liability ―Practical expedients ―Complex area ―Differences may arise. ASC 842: Understanding the Accounting Requirements. IFRS 16 and US GAAP Topic 842 largely converged.

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