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How Lease Capitalization Impacts Borrower Leverage, Liquidity, Profitability, and Repayment Ability
- 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
Overview of the webinar
Generally accepted accounting principles (GAAP) do not change often, but when they do, we need to understand how changes in GAAP effects borrowers’ and clients’ ability to repay. GAAP now requires that companies capitalize their leases, and that may worsen their leverage, reduce their liquidity, lower their profitability, and reduce their ability to repay.
This webinar will explain why lease capitalization of both operating leases and financing leases will impact the financial condition and performance of borrowers.
Who should attend?
- Credit policy managers
- 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
Why should you attend?
- 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 and advise clients under this new GAAP.
Faculty - Mr.Dev Strischek
A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek is principal of Devon Risk Advisory Group based near Atlanta, Georgia. Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc. Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC). PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are more appropriate for privately held firms. He also serves as the PCC’s representative to FASB’s Credit Losses Transition Resource Group supporting the new current expected credit loss (CECL) standard. Dev is the former SVP and senior credit policy officer at SunTrust Bank, Atlanta. He was responsible for developing, implementing, and administering credit policies for SunTrust’s wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking and private wealth management. He also spent three years as managing director and credit approver in SunTrust’s Florida commercial lending and corporate investment banking areas, respectively. Prior to SunTrust, Mr. Strischek was chief credit officer for Barnett Bank’s Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, his experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor in Hawaii, Missouri, and Florida. A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, he earned his M.B.A. from the University of Hawaii. Mr. Strischek serves as an instructor in RMA’s Florida Commercial Lending School, the American Bankers Association's (ABA) Advanced Commercial Lending School and ABA’s Stonier Graduate School of Banking, and the Southwest Graduate School of Banking. His school, conference, and workshop audiences have included participants drawn from the ABA, RMA, OCC, Federal Reserve, FDIC, FFIEC, SBA, the Institute of Management Accountants (IMA) and the AICPA. Recent conference presentations have ranged from the new GAAP accounting principles for revenue recognition, lease capitalization, and current expected credit losses (CECL) to commercial real estate concentration management, from character in lending to leveraged lending, from credit risk management techniques and tools to why EBITDA doesn’t spell cash flow. Mr. Strischek has written over 200 articles about credit risk management, financial analysis and related subjects for the ABA’s Commercial Insights, the Risk Management Association’s RMA Journal, and other business professional journals. He is the author of Analyzing Construction Contractors and its related RMA workshop. A past national chair of RMA and former RMA Florida Chapter president, Dev serves as a member of the RMA Journal’s advisory board, and an ex-officio board member of the Florida and Atlanta RMA chapters. He also serves on the advisory board of the Atlanta Chapter of the Professional Risk Managers’ International Association (PRMIA), and he has consulted on credit risk and policy issues with banks in Morocco, Egypt, and Angola through the US State Department’s Financial Service Volunteer Corps (FSVC).