GE Capital Global Holdings LLC NT
GE Capital Global Holdings LLC NT — GE Capital — Access GE Webinar: FASB-IASB Lease Project Update (December 2013)
27 slides from GE Capital Global Holdings LLC NT's conference presentation, Dec 5, 2013
Slide 1: FASB-IASB Lease Project Update
FASB-IASB Lease Project Update What may be in store for 2014 Thursday, December 5th at 2PM GMT/2 PM EDT Dial-in Info: 1-888-634-4837 Conference ID 11730092 Thanks for joining us! The webinar will begin shortly Copyright © 2011 GE Capital. All rights reserved. “GE,” “General Electric Company,” “Gener
Slide 2: Access GE
Access GE Sharing what we do and what we learned Digital Solutions Live & On Demand Webinars Multi-Customer Summits One-on-One Engagements 2 10/10/2013 Access GE – Q3 Update
Slide 3: FASB-IASB Lease Project Update: Today's Speakers
FASB-IASB Lease Project Update What may be in store for 2014 Today’s Speakers: Jeannine Flower Co-Chair GE Capital Lease Project GE Capital Chad Soares Partner PricewaterhouseCoopers Intended use for participants at event
Slide 4: Disclaimer
Disclaimer The views expressed in this presentation are our own and do not represent the positions of the General Electric Company or its Affiliates and Subsidiaries or PricewaterhouseCoopers LLP (*). This summary material is based on publicly available information. Such information is subject to ch
Slide 5: Agenda
Agenda • Background • What changes have been contemplated? • Where are we now? • What’s in store for 2014? 5 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 6: Background
Background 2014 (?) 201718 (?) Comment period; Redeliberations begin 6 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 7: Leasing perception vs. reality
Leasing perception vs. reality What people think of when What assets are most leases are mentioned . . . commonly leased . .. 7 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 8: What aspect of leasing is set to change?
What aspect of leasing is set to change? An intended change for US GAAP/IFRS accounting Legal definition of a lease unchanged Tax Legal - True lease or Debt -Lease or Sale Tax definition of a lease - Revenue Rulings -UCC unchanged; but - Court Cases -Title potential implications if tax charge ba
Slide 9: Who is potentially affected?
Who is potentially affected? Impacts companies that prepare financial statements in accordance with US GAAP, Small businesses IFRS, or IFRS as adopted by the EU furnishing tax Publicly-listed companies returns may not Private companies subject to… be affected - Local jurisdiction reporting requi
Slide 10: Why change lease accounting?
Why change lease accounting? 2001 – 2002 Enron / Worldcom • Several years to develop 2002 Sarbanes Oxley mandate to SEC • Issues included significant off balance 2005 SEC Study sheet liabilities/structuring and perceived Off Balance Sheet Arrangements insufficient financial information for users 200
Slide 11: What changes have been contemplated?
What changes have been contemplated? 2014 (?) 201718 (?) Comment period; Redeliberations begin 11 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 12: Key themes
Key themes On-going objective Building blocks for capitalization Balance Sheet recognition • Definition of a lease All leases with maximum term, • Lease vs service distinction including renewals, of more than 12 months • Lease term drives capitalization • Index-based / floating rate payments and les
Slide 13: The proposed dividing line
The proposed dividing line Source: PwC 13 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 14: Leases in Balance Sheet and P&L (2 models)
Leases in Balance Sheet and P&L (2 models) Lessee Balance Sheet Profile Lessee Expense Profile Type A vs Type B Equipment / Type A Total Expense Profile ROU Asset Lease Liability Day 1 End Yr1 End Yr2 End Yr3 End Yr4 End Yr5 Type A - Equipment Type B - Property OR Property / Type B ROU Asset Lease L
Slide 15: Potential impact to lessee
Potential impact to lessee • Capitalization of operating leases & Impact on metrics? certain forms of rentals • New lessor rules apply if sub-let owned or rented assets • Complexity in making lease/rental decisions • Increase in book-tax differences • Cost to comply • Cost reimbursements, if predica
Slide 16: Where are we now?
Where are we now? 2014 (?) 201718 (?) Comment period; Redeliberations begin 16 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 17: Objectives of the proposed FASB/IASB standard
Objectives of the proposed FASB/IASB standard Key objectives of this revised accounting standard 1 Improve, simplify and converge the financial reporting requirements for leases Create an accounting model which would provide a faithful representation of 2 leasing transactions for both lessees and le
Slide 18: Alternative views: FASB
Alternative views: FASB 3 of the FASB Board members were of the view that the revised proposal was complex and did not meet user needs: – Hinders users‘ abilities to assess the amount, timing, and uncertainty of the cash flows – Does not represent an improvement to existing requirements for lessee
Slide 19: Summary of FASB/IASB outreach
Summary of FASB/IASB outreach • The FASB/IASB Staff provided a high level summary of the feedback received on the 2013 exposure draft. • The Boards received 638 comment letters • Participated in 8 public roundtables (worldwide) • More than 45 meetings with investors and analysts including more than
Slide 20: Responses by entity type & industry group
Responses by entity type & industry group* Public companies Non public companies Industry Groups Independent Accounting, Advisory, Tax Transportation Banking/Financial Services Energy Retail/Real estate Engineering/Construction/Telecom/IT Other *Based on PwC review of the majority of comment letters
Slide 21: Comment letter trends
Comment letter trends At a glance – Responses to some key questions • Approach to identifying a lease • Dual model based on consumption • Property versus non-property dividing line • Disclosure • Lease term & reassessment • Variable payments & reassessment • Transition *Based on PwC review of the ma
Slide 22: Comment letter trends
Comment letter trends Frequent comments Cost and complexity will increase The new dividing line is not an improvement over existing guidance statement Existing guidance should be retained with enhanced disclosure Single model for income statement *Based on PwC review of the majority of comment lette
Slide 23: What's in store for 2014?
What’s in store for 2014? 2014 (?) 201718 (?) Comment period; Redeliberations begin 23 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 24: Summary of FASB/IASB outreach
Summary of FASB/IASB outreach Key comment areas Re-deliberation plan • Lessee accounting model • Lessee model, lessor model, lease classification, scope simplifications • Lessor accounting model • Measurement: lease term, reassessment of • Lease classification variable lease payments, in-substance f
Slide 25: Closing
Closing 25 Intended use for participants on Webinar GE Capital Webinar Insight Series December 5, 2013
Slide 26: Final comments
Final comments • Lease accounting changes still evolving; still a way to go to address cost/complexities • Redeliberation has begun; more insights to come in 1H 2014. • Final standard was earmarked for 2014…achievable? - Boards need to decide on way forward e.g., whether they split lessee-lessor mod
Slide 27: Questions?
Questions? Jeannine Flower Chad Soares Co-Chair GE Capital Lease Project Partner GE Capital PricewaterhouseCoopers Intended use for participants at event
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