BankerCollege

Generally accepted accounting principles (GAAP) do not change often, but when they do, bankers need to understand how changes in GAAP effects their borrower's ability to repay.  GAAP is requires that companies capitalize their leases, and that will worsen their leverage, reduce their liquidity, and lower their profitability.

This bank webinar will explain why and when lease capitalization will be implemented and show how capitalizing both operating leases and financing leases will impact the financial condition and performance of borrowers.

Key learning objectives include:

• Learn the key elements of the lease capitalization GAAP
• Explain how lease capitalization will put both the lease liability and the right-of-use asset on the borrower’s balance sheet
• Offer guidance on what items of financial condition and performance will be most impacted and tips on how to underwrite borrowers under the new GAAP

Specific topics covered in the webinar include:

• Lease capitalization
  • Implementation date
  • Elements of capitalization—capitalization rate, amortization, right-of-use asset, lease liability
  • Operating leases and financing leases

• Analysis and underwriting
  • Ratio covenants most sensitive—leverage ratio, current ratio
  • Lease cap’s impact on liquidity, leverage, solvency, and profitability

• Portfolio management
  • Identification of industries and borrowers most sensitive to lease cap
  • Review and restructuring as needed of loans with financial covenants affected by lease cap