May '16

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rv-pro.com MAY 2016 • RV PRO • 81 current level of the index. The values of the asset and liability would be updated every year as the index changed. An Ill Wind Blows Some Good The new lease accounting guidelines, like the FASB'S slightly older set of rules on recognizing income, also offers a treat for many small businesses, albeit a somewhat hidden and hard-earned good thing. The new leasing guidelines will, admittedly, require a detailed collecting and spread-sheeting of existing leases held by the RV business. Fortunately, such an accounting will allow a serious study of how well all of those leases fit into the operation's business model. Should the business continue on its past course with automatic, "as-is" lease renewals? After all, while much focus is on the cost of compliance, there also are ways to identify cost savings by exam- ining the leasing activities of the RV manufacturing, distribution, sales or rental business. Another question is whether the existing contracts with customers that generate revenue is still the right one for the business now that new guidelines exist for when revenue must be recognized? Implementation Now, Mandatory Later Publicly traded companies will be required to adopt the new standard for fiscal years beginning after Dec. 15, 2018. For calendar year-end public companies, this means an adoption date of Jan. 1, 2019, and retroactive application to previously issued annual and interim financial statements for 2017 and 2018. Nonpublic companies, such as privately owned RV businesses, will be required to apply the new leasing standard for fiscal years beginning after Dec. 15, 2019. Thus, for most businesses this means an adoption date of Jan. 1, 2020, and retroactive applica- tion to previously issued annual financial statements for 2018 and 2019. And, no one will object if an organization jumps the gun in applying the new guidelines. Although these effective dates might seem like they are quite far away, every RV business professional should begin preparing for the new lease accounting requirements now. After all, with many RV operations involved with a number of leases – and les- sors – the long adoption period can mean fewer surprises with existing leases. The Question Should your RV business lease or buy equipment? Leasing equipment and other business property can be a good option for a business with limited capital or in need equipment that must be upgraded every few years. Purchasing equipment can be a better option for established businesses or for equipment that has a long usable life. Although taxes play a role in whether to lease or to purchase, they should not be the deciding factor. But, will the new accounting guidelines and the accompanying impact on the operation's finan- cial status come as a surprise? Most importantly, when should your RV business begin playing under the new rules? Don't Get Lost in the Wilderness. Find News & Business Solutions at RV-PRO.com Find answers and stay up-to-date with daily news for the RV professional at rv-pro.com Sign up for the newsletter to receive daily news, videos, blogs and more!

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