Lease capitalization has significantly impacted financial reporting by requiring borrowers to disclose their lease liabilities on their financial statements. This provides lenders with a more accurate and comprehensive view of a borrower’s total obligations, allowing for better-informed decision-making. With a clearer picture of a borrower’s financial commitments, lenders and creditors can now more accurately assess the borrower’s ability to repay debts, ensuring a more precise evaluation of their overall financial health.

Topics covered in this session

Lease capitalization GAAP  (ASC 842)

• Implementation date
• Elements of capitalization—capitalization rate, amortization, right-of-use asset, lease liability

Operating leases and financing leases

• Analysis and underwriting
• Impact on cash flow
• Ratio covenants most sensitive—leverage ratio, current ratio

Lease cap’s impact on liquidity, leverage, solvency, and profitability

• Liabilities—additional long-term debt and short-term debt
• Right of use (ROU) asset—additional fixed assets and treatment as intangible assets

Portfolio management

• Identification of industries and borrowers most sensitive to lease cap
• Changing interest rates—impact on capitalized lease asset and ROU asset
• Review and restructuring as needed of loans with financial covenants affected by lease cap

 Who Should Attend:

• Credit policy managers
• Commercial lenders
• Business bankers
• Commercial loan underwriters
• Credit managers
• Credit Risk Managers
• Credit approval officers
• Risk Managers
• Enterprise Risk Managers
• Chief Credit Officers
• Senior Lenders
• Senior Lending Officer
• Bank Director
• Chief Executive Officer
• Bank President
• Board Chairman