IASB and FASB New Lease Accounting Standards - What does this mean for tenants?
Could anyone in real estate finance/Occupier strategy explain (in layman's terms), what this new change constitutes and how it might effect corporate RE strategy.

From my understanding, tenants will now have to capitalize their leasing expenses. Somehow this will create an incentive for Single-Tenant Net Lease occupiers to own rather than lease. Any simple explanation would be appreciated.
[{"id": "d0jpp6w", "text": "Not entirely sure either. From an initial read of the announcement, I think this is more of an issue from tenant's perspective. On the landlord side, it will cause some ripple effects when it comes down to lease negotiations. ", "replies": [], "depth": 1}, {"id": "d0l3q6m", "text": "Here's my take on it:\n\nPrevious accounting standards allowed tenants to book lease expenses simply as an expense (e.g. rent expense) if it met certain qualifying standards, typically known as an operating lease.  There would be no asset or long-term liability associated with this expense on the balance sheet, even if it was a lease that spanned several years, so long as it met those certain criteria.  (They are disclosed in the footnotes to the financial statements, however.)\n\nFASB/IASB has discussed for years about bringing these expenses onto the balance sheet because it would be a more accurate reflection of what the tenant actually has (e.g. a right to use a space, and an obligation to pay the lease).  The change now basically tells tenants to book corresponding entries as an asset and a liability to reflect those items so we should see this change on the balance sheet occur over the next few years as this standard gets phased in.\n\nPreviously and especially in the single-tenant net lease space, many retailers/tenants would purposely structure deals as operating leases to keep their real estate dealings off the balance sheet and to focus on their core business.  But since they are now required to report lease obligations as assets and liabilities, it is essentially the same as if they had just simply owned the real estate (with some minor quirks and differences).\n\nIn my opinion, I don't think this will really cause many tenants to start buying the buildings that they lease.  Many of the larger retail chains have known that this has been in the works for years.  Publicly traded companies already have this priced into their stock since equity analysts typically make adjustments for off-balance sheet items anyway.\n\nDisclaimer: I am former CPA who audited REITs and other real estate companies who now works in CRE investments.  I do not know this standard very well but am getting up to speed on it.  Someone who knows better, feel free to correct me.  \n\n(Sorry no tl;dr.)", "replies": [{"id": "d0taidh", "text": "Thanks - and good point, retailers definitely knew this was coming", "replies": [], "depth": 2}], "depth": 1}]