May '16

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78 • RV PRO • MAY 2016 rv-pro.com E ven as credit becomes more readily available, whether to buy or lease is a question facing many RV business professionals. While there is no one correct answer that fits every situation, nor every RV business, compared to the simplicity of buying, leasing is far more complicated and may be getting more complex. Thanks to negotiations between the International Accounting Standards Board (IASB), which sets rules for many countries around the globe, and the U.S. Financial Accounting Standards Board (FASB), which writes the rules in the United States, the lease accounting rules as we currently know them are changing. The new rules will soon require many businesses to add all but the shortest leases to their balance sheets as liabilities, much like debt, affecting the way potential lenders, investors and suppliers view the RV manufacturing, distribution or dealer- ship operation. New Rules Today, few leases get recorded because the guide- lines allow lease contracts to be structured to appear as simple rentals. If an obligation is not recorded on a balance sheet, it makes a business appear less lever- aged than it really is. The existing guidance under the "Generally Accepted Accounting Principles" (GAAP) says busi- nesses are only required to record lease obligations on their balance sheets when the arrangements are comparable to financing transactions, such as rent- to-own contracts for buildings or vehicles. According to the Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), business that lease assets – or lessees – will now be required to recognize assets and liabilities on their balance sheets for leases with lease terms of more than 12 months. Previously, the recognition, measurement, and presentation of expenses and cash flows arising Lease vs. Buy Decision Gets Tougher New rules requiring many businesses to add leases to their balance sheet as liabilities may make that option less desirable. MARK E. BATTERSBY is a freelance writer who has specialized in taxes and finance for the past 25 years. Working from Ardmore, Pa., Battersby writes for publications in a variety of fields, syndicates two weekly columns that appear in more than 65 publications and has written four books. New rules will soon require many businesses to add all but the shortest leases to their balance sheets as liabilities, much like debt. With that accounting rule change, RV businesses may want to reevaluate the pros and cons of leasing vs. purchasing.

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