In less than 60 days new accounting rules will impact operations, and organizations whose finance and operations personnel are on the same page will benefit the most. Selecting the right financing is just as important as choosing the right equipment. No matter the fleet size, these changes will compel an even greater collaboration between those who cut the checks and those who rely on forklifts every day.
The Financial Accounting Standards Board (FASB) has approved changes to Accounting Standard Codification (ASC) 842, which affects operating leases. On January 1, 2019, the Finance Accounting Standards Board's FASB13 will take effect. FASB13 calls for every lease to be classified as either an operating lease or capital lease based on specific criteria.
Currently, capital leases are reported on the balance sheet as an asset and liability. Operating leases, however, are supposed to be footnoted on the balance sheet but are expensed on the income statement. The new guidance generally stipulates that lessees will be required to recognize both Capital and Operating leases as assets and liabilities for leases with term of more than 12 months. Beginning Jan. 1, 2019, all leases (capital and operating) will be required to be accounted for on the balance sheet as right-of-use (ROU) asset and lease liability on their balance sheet. *
“This will have a couple of significant impacts to companies. First, having all leases on the balance sheet will give creditors greater visibility to total liabilities. Secondly, many companies did not require capital approval of off-balance-sheet acquisitions such as rentals and operating leases, which made it quicker and easier to obtain equipment. The increased scrutiny associated with on-balance-sheet capital approvals may slow or restrict some companies’ equipment acquisition process, which makes it more important than ever for finance and operations to partner up,” Sue Rice says.
Leasing is an increasingly popular means of controlling expenses and guaranteeing access to the latest technology. The best way to keep finance and operations departments aligned is to use a data-driven approach to fleet management. Data is becoming increasingly important in the material handling industry, which is why telematics systems are growing in popularity. Toyota T-Matics MOBILE and T-Matics COMMAND deliver important insights about your forklift and operators. T-Matics offers a solution that gives greater visibility to your fleet's performance. Some of the features include fleet utilization/optimization, web-based dashboards & reporting, electronic hour meter collection, fully mobile, impact detection, etc. Bottom line...What gets measured, gets managed.
Still have questions? Dillon Toyota Lift is here to help. We can help determine what equipment and finance options are best for you in the long-term.
*We encourage customers discuss these changes with their Accountants, Auditors and Creditors to better understand the effects these revisions may have on their business.