How can you educate stakeholders on lease accounting and valuation concepts and practices?

1 Explain the lease types

One of the first things you need to explain to your stakeholders is the difference between operating leases and finance leases. Operating leases are short-term contracts that do not transfer ownership or control of the asset to the lessee. Finance leases are long-term contracts that do transfer ownership or control of the asset to the lessee. The type of lease affects how you recognize revenue, expenses, assets, and liabilities on your financial statements. For example, under the new lease accounting standards (IFRS 16 and ASC 842), you have to record a right-of-use asset and a lease liability for both operating and finance leases, whereas under the old standards (IAS 17 and ASC 840), you only had to do that for finance leases.

4 Address the common challenges

The fourth thing you need to explain to your stakeholders is how you overcome the common challenges of lease accounting and valuation. These include dealing with complex lease structures, such as variable lease payments, lease modifications, and embedded leases, managing the data and technology requirements, such as collecting and storing lease information, performing calculations and adjustments, and generating reports and disclosures, and adapting to the changing market conditions, such as fluctuations in interest rates, property values, and demand and supply.

5 Provide the useful resources

The fifth thing you need to explain to your stakeholders is how you access and use the useful resources of lease accounting and valuation. These include professional guidance and advice from experts, such as accountants, auditors, appraisers, and consultants, educational materials and tools from reputable sources, such as publications, courses, webinars, and software, and industry benchmarks and trends from reliable data providers, such as reports, surveys, and databases.

6 Invite the feedback and questions

The sixth thing you need to explain to your stakeholders is how you welcome and appreciate their feedback and questions. You can do that by creating opportunities for dialogue and interaction, such as meetings, calls, emails, and surveys, listening actively and respectfully to their opinions and concerns, and responding promptly and effectively to their inquiries and issues. You can also ask them for their suggestions and recommendations on how to improve your lease accounting and valuation practices and outcomes.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?