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IAMC INSIDER
From Site Selection magazine, January 2011
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Positive Goals

Doyle Shea
Doyle Shea
IAMC Chair

Welcome back to work after a well deserved and hopefully safe holiday break. If your holidays were anything like mine, you've had your full share of winter travel, food, football, festivities and, maybe, even family. Yes the holidays can mean too much of everything, but I would do it all again. Please just give me a few months to get rested and caught up on work.

Heading home during the holiday season presents a great opportunity to catch up with extended family and old friends. For me, it is that once-per-year chance to spend time with those I grew up with and find out what is going on in their lives. You get to meet the newest family members, see how much the next generation has grown in height and wisdom, hear about the ups and downs of the past year and, most importantly, learn their plans for the future.

It is those plans for the future that I always find the most interesting. Everyone makes them, and we tend to go overboard on making resolutions around the start of a new year. There is, however, one constant theme — all of the resolutions and goals that we make for the upcoming year are positive. I don't think that I have ever heard of anyone making a New Year's resolution to gain weight, exercise less, upset the family or lose their job in the coming year.

We make positive goals in our workplace to increase profits, increase our knowledge, become more productive, enter new markets, change processes and train our people. We make personal goals to improve our health, the relationships within our families and our impact on the communities we reside in.

The IAMC board of directors will also be making a set of New Year's resolutions. Later this month, we will gather in Atlanta and start the process to develop our strategic plan for 2012. We will also be starting a review process to gain consensus on a five-year financial plan for the organization. Adopting a five-year financial plan was one of the resolutions I made to IAMC when I became chair last fall. Please hold me to that commitment.

IAMC also has something else that resembles a family. We get together twice a year for our "family reunions." The Professional Forums give each of us a chance to catch up with others in our family and community. We share our successes, our disappointments and our plans for the upcoming year. So make your resolution to attend our Forums this year in Albuquerque and Philadelphia. They will give you a great chance to catch up with your extended family and share your success stories and plans.

I always find the winter months to be a great time to reflect on the past year and to plan for the upcoming year. I just noticed that I am sitting on the couch, snacking, watching football and writing this column, so maybe I need to work on my resolutions. Sounds like a good plan. I will get right on it as soon as this game is over.

Doyle Shea
IAMC Chair

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IAMC INSIDER
From Site Selection magazine, January 2011
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Snapshot: Fall 2010 IAMC Professional
Forum, The Homestead, Hot Springs, Va

Bright-Line Tests Set To Dim
Under Lease Accounting Changes

Bret Hardy, executive managing director, corporate finance, Colliers International in Los Angeles
B

anks, insurance companies, airlines, manufacturers and retailers will be among those most affected by new lease accounting changes once they are formally adopted by the Financial Accounting Standards Board (FASB). And IAMC active members are major lease holders, so the Monday morning Workshop at IAMC's Fall 2010 Professional Forum in Hot Springs, Va., on that topic was standing room only. Bret Hardy, executive managing director, corporate finance, at Colliers International in Los Angeles, was the speaker at the Oct. 4 session. Forty-five minutes was hardly enough time for Hardy to cover the material he intended to cover, let alone answer the steady stream of attendee questions that peppered his presentation.

Under rules in place since the early 1970s, bright-line tests today determine whether leases are to be considered operating or capital. That will change.

"If you subscribe to the notion that leasing is a form of financing, no different than a debt obligation, then that's the reason you should have it on the balance sheet and that it should be shown that it's in the performance metrics of an organization — that's really the core principle of change here," said Hardy at the outset. "Let's get rid of these accounting rules that allow corporate controllers, CFOs — corporations — to engineer results relative to leases."

A Colliers white paper on the topic authored by Hardy puts the impetus behind the change this way: "The objective … is to create a common lease accounting standard to ensure that assets and liabilities arising from lease contracts are uniformly recognized in the financial statements. Current standards allow companies to structure leases to achieve a desired/predetermined lease accounting treatment. The new standard, if adopted, would eliminate that flexibility."

The result of the changes will be a single method of lease accounting, complete and comparable reporting results and a diminished ability to engineer results by doing away with the bright-line tests.

FASB, and the International Accounting Standards Board, also intend to improve financial statements. "Financial statements must reflect the impact of all financings," Hardy illustrated. "The way to do this is the right-of-use model. The balance sheet will now reflect an asset for the right to use leased property; it's going to reflect an obligation for you to pay rent. The goal here is that the relative performance metrics of the organization are now going to reflect these obligations, and they will become much more comparable."

At press time, FASB had issued an Exposure Draft of the new lease standards and was seeking comment letters. The new standard should be complete in 2011 and should take effect in 2012 or 2013.

In the meantime, says Hardy, corporate real estate executives can take several steps to prepare. These include understanding the new standards' details and mechanics, focusing more time and resources on lease administration and accounting, investing in systems to track lease obligations, proactively restructuring long-term obligations, engineering efficiency into the lease decision process and working with finance and treasury to design optimal lease structures and covenants.

— Mark Arend



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