BUSINESS CFO ROUNDTABLE BRIEFING SPECIAL EDITION UPDATE NAVIGATING THE PROPOSED LEASE STANDARD Corporate real estate considers the implications of right-of-use assets SEPTEMBER 2010 CONTENTS Executive Summary 12 Introduction: Reading the map Good Exposure people are Draft harder recommendations to find 25 anchors New path aweigh to productivity 3 Right-of-Use New awareness calculation reaches c-suite 4 7 Market Keeping workforce an even keel risks Transition planning 9 cre focus Making headway through issues 13 Summary Cushman & Wakefield, Inc. 51 West 52nd Street New York, NY 10019-6178 Tel (212) 841-7500 www.cushmanwakefield.com Workforce Winds of change planning continue the to process set the of course analyzing for lease and forecasting accounting: the talent needed to execute a business strategy is quickly becoming a priority for companies This business of all briefing sizes. The considers more frequent the CRE use perspective of the term on talent the August alone 2010 offers Exposure evidence Draft of the entitled growing Leases awareness the of second the competitive formal step value in the provided global by process knowledge to change workers. the The method following of lease briefing accounting offers a to look Right-of-Use at the new wave of asset workforce (ROU) planning accounting. and how The new first technology step was the is enabling March 2009 companies release to of make the location Discussion decisions Paper that Leases: support Preliminary long-term Views. labor and productivity objectives. The Exposure Draft reflects the recommendations developed over 17 months of deliberations by international committee and working group members pursuant to the 2009 Discussion Paper. It provides details on the mechanics of the proposed new standard and invites comments for a 120 day period after release. As anticipated, the recommended standard proposes the replacement of all operating leases with Right-of-Use asset lease accounting for lessees. This massive shift from recording annual rent expense to adding new classes of assets and liabilities to balance sheets around the world will result in the transformation of financial reporting, business processes and measurement metrics across all US and global industries. Lessor reporting also changes under the new proposals with a cafeteria of applications (including performance obligation, derecognition, and operating models) depending on jurisdiction, lease contract terms, and the nature of the asset being leased. Cushman & Wakefield, Inc. 1290 Avenue of the Americas New York, NY 10104 Tel (212) 841-7500 www.cushmanwakefield.com Cushman & Wakefield, Inc. 51 West 52nd Street New York, NY 10019-6178 Tel (212) 841-7500 www.cushmanwakefield.com BUSINESS BRIEFING SEPTEMBER www.cwcforoundtable.com 2010 SEPTEMBER 2010 1
1. READING THE MAP: A LOOK AT THE EXPOSURE DRAFT RECOMMENDATIONS Will the changes affect your business? Your responsibilities? Your transactions? Global standard setters the Financial Accounting Standards Board (FASB, which sets US accounting standards) and the International Accounting Standards Board (IASB, which sets accounting standards for all IFRS regulated countries) remain united in the view that the replacement of lease accounting is a priority as they seek to move off-balance-sheet arrangements onto the balance sheet. In June 2010, FASB and IASB released a modified strategy for the rollout of accounting standards in which the project to replace the lease standard was cited as a high priority. This massive shift from recording annual rent expense to adding new classes of assets and liabilities to balance sheets around the world will result in transformation of financial reporting, business processes, and measurement metrics across all US and global industries. Recommendations outlined in the current Exposure Draft largely follow the March 2009 Discussion Paper requiring the recording of a Right-of-Use asset (ROU) and corresponding debt obligation, but also address broader issues than earlier and provide more detail on the specifics of the application of the standard. Tables 1, 2 and 3 summarize key recommendations in the Exposure Draft and how they apply to lessee and lessor roles in commercial lease arrangements. Table 1 Exposure Draft Recommendations Recommendation Lessee Lessor Timeline Method Exposure draft August 2010 Right-of-Use asset and corresponding liability Comment period 120 days Final standard Adoption of standard Summer 2011 Est 2013/2014 Performance obligation (for real estate) OR fair value option for investment properties (potential) CRE Application Lessee: All lease obligations will require the reporting of a Right-of-Use asset and corresponding liability. There is no definition of materiality, as aggregate totals of numerous small lease arrangements could still compile to material amounts. Additionally, there are no rules applying to terms of less than one year simply an easier calculation that still records an asset. A sample calculation is presented in the next section of this briefing. Lessor: Under the Performance Obligation methodology recommended for real property, the lessor would record an obligation and corresponding receivable for the lease calculated in a manner similar (but inverse) to the tenant recording. Note: The lessor Performance Obligation may not record the same value as the lessee Right-of-Use for the same transaction due to differences in assumptions and discount rates. 2
It is important for lessors to note that the FASB is considering a new standard of fair-value reporting for investment properties under US GAAP, which would allow CRE lessors holding properties for investment purposes to retain operating lease accounting for their tenants. This would be similar to current IFRS reporting under the new standard. Table 2 Exposure Draft Recommendations Recommendation Lessee Lessor Post-transition (and for new leases), the lessor would continue to show the net asset/liability combination for the lease as well as the underlying asset, rather than separate components. Recording Transition CRE Application At lease inception net asset/liability At lease commencement separate asset/liability At lease inception net At lease commencement net presentation Simplified retrospective application required for initial reporting periods for comparative purposes No grandfathering of existing obligations Transition calculation for Right-of-Use asset includes prepaid rent, deferred rent credits, and impairment review Lessee: The no grandfathering of existing obligations would require lessees to record a ROU asset to be calculated at the transition date, and with the corresponding debt obligation on that date discounted at the lessee s incremental borrowing rate. Post-transition, a lessee would perform the calculation at the lease inception date and present the components on a net basis until lease commencement. At that point, the separate components would be reported on the balance sheet as an asset and a liability. As well, the Exposure Draft recommends the simplified retrospective application be used for comparative reporting purposes at transition for any prior years shown on the financial reports. This means lease obligations would be calculated for the years before the actual transition (i.e. 2011, 2012), where comparative data is used in financial reporting. Lessor: If the performance obligation method is utilized, the lessor would follow the same methodology as the lessee for grandfathering and transition recording, although the presentation of components would be net. Post-transition (and for new leases), the lessor would continue to show the net asset/liability combination for the lease as well as the underlying asset, rather than separate components. This net position does not trigger the ratio volatility for the lessor that a lessee would experience. The pattern of revenue recognition would shift however and create reconciliation requirements to FFO and other standard industry metrics. 3
Table 3 Exposure Draft Recommendations Recommendation Lessee Lessor Applies to Exclusions Base rent components of all lease agreements Service component Lease term Facts and circumstances known to lessee If renewal clause exists: longest possible term more likely than not to occur Facts and circumstances known to lessor Remeasurement Based on changes in facts and circumstances known to lessee Each reporting period for: Lease term, estimates and contingencies Based on changes in facts and circumstances known to lessor CRE Application One of the most onerous recommendations is the requirement that the probability of the lease term more likely than not to occur be determined when recording the lease where renewal or termination provisions exist in the agreement. Lessee: The details of the base rent must be extracted from each lease agreement. Where escalation provisions are based on estimates (i.e. indices, performance) the estimate must be calculated and documented for each arrangement. Additionally, where a lease is structured as full-service or gross, the base year, which represents distinct service components, must be determined and removed from the calculation of base rent to record the ROU asset and obligation. Note: Base stops do not necessarily equal base years. One of the most onerous recommendations is the requirement that the probability of the lease term more likely than not to occur be determined when recording the lease where renewal or termination provisions exist in the agreement. This is based on facts and circumstances that should be documented and must be revisited every subsequent reporting period during the lease term should changes arise. Example: If a company executes a 10-year lease with two five-year renewal options for a data center and makes a significant investment in highly specialized tenant improvements, equipment, and fixtures at the outset, then it will have to consider these facts and circumstances at the initial recording of the lease. This could result in a 10-,15-, or even 20-year term being recorded at the outset for the ROU asset and obligation. Assumptions used in the decision should be documented. Lessor: This process is similar to lessee, unless the fair value standard is introduced. The lessor can only use those facts and circumstances of which it is aware. At first glance, the recommendations are somewhat daunting in their scope and complexity. The balance of this briefing will attempt to clarify them with actual examples of the financial calculations involved, and identify business issues related to commercial real estate that could arise as a result of the new standard. 4
2. ANCHORS AWEIGH THE CALCULATION A Right-of-Use asset is not your average capital lease Regardless of the 2013 timeline, the effect of the proposed change will be felt much earlier as project teams ramp up through 2011 and 2012. Early measurement will identify the critical agreements that require amendment or renegotiation. Reporting requirements for capital leases have been embedded in the current accounting standards for decades. However, the vast majority of commercial real estate arrangements have met operating lease requirements. As a consequence, the number of transactions actually recorded as capital leases has been minimal relative to the volume of leasing activity and such calculations are not a familiar process in many companies. Further complicating the transition to the new standard is that the calculation of a Right-of-Use asset differs from traditional capital lease accounting as we know it. The new standard introduces additional complexity in the calculation through the requirement to: Determine the lease term that is more likely than not to occur. Remeasure the lease term and estimated rents at each reporting period based on facts and circumstances. Provide adequate documentation to support how estimates above were derived. Review impairment under FASB Section 360-10-35 at each reporting period. INITIAL: Table 4 on the next page illustrates a lessee example of the initial measurement of asset and obligation using the: Present value of the lease payments (base rent component). Incremental borrowing rate of the lessee (or implicit rate in the lease if available). Longest possible lease term that is more likely than not to occur. Estimates of the most likely contingent rents and residual value guarantees, if any Removal of executory/distinct service costs if not NNN arrangement (i.e. full service base year). Subsequent to the initial recording: The new asset is amortized over the lease term based on the pattern of use and control (typically on a straight-line basis) and the liability is amortized using the effective interest method. Rent disappears as amortization and interest expense now reflect the leasing costs. 5
Table 4: Lessee perspective Lessee Example Financial Reporting for Simple NNN Lease Under New Standard Assumptions: 25,000 SF NNN Lease 5 Year Term 8% Cost of Funds Turnkey No abatement Base Rent (PSF) NNN $23.00 $23.69 $24.40 $25.13 $25.89 Step 1 Recording of the transaction under the new standard begins with the cash flow for the lease term NPV of the Right-of-Use component (base rent) must be calculated This determines the Right-of-Use asset and the corresponding lease liability to be booked Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Total Base rent cash flow $575,000 $592,250 $610,018 $628,318 $647,168 $3,052,753 $2,514,152 NPV Rent expenses current standard straight line $610,551 $610,551 $610,551 $610,551 $610,551 $3,052,753 Step 2 The Right-of-Use asset is amortized over the term The lease obligation is drawn down by the effective interest method Interest $169,082 $152,777 $115,634 $73,915 $27,193 $538,601 Amortization of Right-of-Use $502,830 $502,8330 $502,830 $502,830 $502,830 $2,514,152 New standard P & L $671,913 $656,607 $618,465 $576,745 $530,023 $3,052,753 % change to current 10.1% 7.4% 1.3% -5.5% -13.2% 0.0% % change to cash flow 16.9% 10.7% 1.4% -8.2% -18.1% 0.0% Table 4 compares the P&L expense pattern of the new standard with the existing lease standard and cash flow. Expense recognition under the new standard is higher in the early years relative to both cash flow and the current lease standard. Table 5 Balance Sheet Perspective: Recording of ROU Asset and Lease Obligation Component Opening Calculation for Balance New Standard Sheet Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Total RIGHT-OF-USE ASSET $2,514,152 $2,011,322 $1,508,491 $1,005,661 $502,830 $0 P & L straight line amortization $502,830 $502,830 $502,830 $502,830 $520,830 $2,514,152 DEBT OBLIGATION $2,514,152 $2,108,234 $1,668,761 $1,174,378 $619,975 $0 Interest effective interest method $169,082 $152,777 $115,634 $73,915 $27,193 $538,601 Principal reduction of debt $405,918 $439,473 $494,383 $554,403 $619,975 $2,514,152 Rent payment per lease $575,000 $592,250 $610,018 $628,318 $647,168 $3,052,753 6
CALCULATION CHALLENGES a. The requirement for lease-term remeasurement and estimates at each reporting period makes ROU asset recording more burdensome than outright ownership or existing capital lease recording. Under the current standard, events must occur for any remeasurement to be required, such as a lease renewal, a cease use, or a listing for sale. As proposed, changes in facts and circumstances could trigger this requirement a much lower threshold than we have today. Special situations such as long-term land leases, jurisdictions offering evergreen lease renewals, and other complicated arrangements add complexity to the remeasurement task. b. No grandfathering of existing leases. The transition calculation requires the new arithmetic to be applied to remaining obligations on the transition date with a few twists added: Prepaid rent will be added to the ROU asset. Deferred rent credits will be credited to the ROU asset (meaning the opening ROU asset will not equal the lease obligation on that date). The new asset will be subject to impairment measurement per FASB codification 360-10-35. A simplified retrospective application of the standard will be required for comparative data presented in the financial statements. This means that the company may need to calculate the effect for 2011 and 2012 if a transition occurred in 2013. 3. KEEPING AN EVEN KEEL TRANSITION PLANNING For those corporations with significant lease obligations the countdown has already begun. The anticipated timeline to implementation is shown in Table 6. Table 6 Timeline Exposure draft Comment period August 2010 120 days Final standard Adoption of standard Summer 2011 Est 2013/2014 It is not well understood by many how much work will be involved in the transition to this standard. Lease reporting has been totally reconfigured and is embodied in most businesses globally. Businesses should develop an action plan early on that designates a project team for adoption to prioritize project tasks and assign responsibilities over the available timeline. Key components of planning for the transition are identified in Tables 7 and 8 on the next page. Regardless of the 2013 timeline, the effect of the proposed change will be felt much earlier as project teams ramp up and begin to collect data and revise processes through 2011 and 2012. Early measurement will identify the critical agreements that require amendment or renegotiation. 7
Table 7 Responsibility CFO/Finance CRE Operations Legal/Treasury Taxation Information Systems Transition Planning for the New Standard Lessee Develop enterprise response Prepare initial forecast to determine effect of standard and materiality Develop communication strategy for CEO/Board/Stakeholders Modify budget approval processes related to Right-of-Use asset leases and financial cycles Develop financial forecast processes to straddle transition periods Recalibrate financial statements & determine volatility of ratios Anticipate that decisions on real estate portfolio may be delayed during transition period No grandfathering of existing leases means data collection on existing commitments is mandatory Determine method to track key lease metrics for new standard new and ongoing Develop centralized lease management/database Initiate protocol for lease approvals new, renewal, sublease, recast Review financial and debt covenants in all agreements Review EBITDA targets in all incentive/performance agreements Review definition of GAAP in all agreements Modify loan and other agreements where required in advance of standard adoption Determine if recast assets trigger taxation events in any jurisdiction Assess impact on deferred tax assets and liabilities Determine modules or updates necessary for business & reporting systems Complete roll out of modules in advance of standard adoption The proposed change is vast; global adoption across many businesses and industries at the same time ensures that technical resources will be spread thin during the transition phase. Prepare a summary of key external partners (Table 8) that will be critical to implementation and begin discussions now. Table 8 Transition Planning for the New Standard Resources External Align external resources necessary for transition Banks/financial institutions Information technology providers Professional accountants/auditors/legal Brokerage/external service providers Consultants valuation Taxation regulators/specialists Education/training 8
LESSOR TRANSITION The lessor transition to the new standard is very different from the lessee position for a variety of reasons, such as: Lessor Adoption of the Standard: Ongoing deliberations by FASB include the consideration of fairvalue reporting for lessors who hold property for investment purposes. If approved, these lessors would retain operating lease reporting and forego the performance obligation method for leases. While an important deliberation, it sends a mixed message. No one can fault lessors for delaying their action plan given the stark contrast in the options under discussion. There is no time to follow the wrong planning path. The need for a speedy decision on the fair-value alternative is critical. Lessors have a vested interest in understanding how the technical side of the standard may influence leasing decisions for their tenants. This is their lifeblood. Lessor Business Strategy: Lessors have a vested interest in understanding how the technical side of the standard may influence leasing decisions for their tenants. This is their lifeblood. Literacy in the new standard will be mandatory for strategic planning surrounding the structure of lease agreements, and developing competitive tools. The standard doubles the complexity of the lessor transition. Decisions surrounding the lessor s own implementation of the standard are ambiguous and understanding the tenant position to develop competitive strategies is complex. Lessors have a lot of work to do during the anticipated transition period ahead. 4. CRE FOCUS MAKING HEADAWAY THROUGH THE ISSUES PORTFOLIO PLANNING & MANAGEMENT Managers of large portfolios will experience massive change under the new standard, including: Budget responsibilities during transition will be demanding, as complex calculations deliver numbers that front load the expenses. Allocation of costs to divisions will require new formulas. Databases will have to be compiled. Managers of large-volume portfolios will need sophisticated data collection and management systems to ensure key components of the lease are captured each reporting cycle. Additionally, documentation will be required to support the assumptions used in the reporting processes for the company, which explains the choices made in determining estimates and lease terms under renewal provisions. 9
APPROVALS CRE managers will also experience new hurdles in the approval process, as leases become capital items. Calculations of the ROU asset should accompany the lease negotiations so that the lease executed delivers the amount anticipated in the ROU approval. Routine recast and renewal negotiations will also require the same level of scrutiny to detail. Under the new standard, each transaction must be scrutinized component by component to determine what measurement should be applied to it. Similar leases may be subject to different values based on the subjective interpretation of facts and circumstances underlying the renewal terms and indexed rents. ExamplE: One provision that will complicate the ROU approval process is the more likely than not term measurement when there are lease renewal provisions. For example, probability weighting of a more likely than not lease term could result in a 50,000-square-foot, five-year-term ROU asset approved at $5 million being recorded as a $10-million ROU asset and exceeding the amount approved by 100%. Additionally, if the base-year component of a full-service agreement was over estimated by $0.75/per-square-foot, the final balance could increase by $300,000. COMMERCIAL REAL ESTATE DIVERSITY The consistency of operating lease reporting is leaving corporate real estate, as principles and judgment enter the arena of lease transaction recording. We will miss a standard that was applied evenly across all commercial leases and was easy to interpret. Under the new standard, each transaction must be scrutinized component by component to determine what measurement should be applied to it. Similar leases may be subject to different values based on the subjective interpretation of facts and circumstances underlying the renewal terms and indexed rents. Assumptions on the lease term will differ widely by commercial real estate segment and geography. Whether an asset manager is trying to follow trends within the portfolio, or a real estate director is trying to create a long-range plan for a current data center under variable occupancy options, the addition of more factors to the equation will add complexity to the task and to the decision-making process. CONTRACTS AND AGREEMENTS Covenants are conditions embedded in most contracts. Where they set performance targets through EBITDA, establish ranges of financial ratios, outline debt restrictions, or define GAAP models to apply, they will need to be revisited and perhaps renegotiated in advance of the transition to the new standard. And that s easier said than done. 10
When the new lease standard introduces new assets, debt, interest, and amortization charges to financial reporting, all ratios and EBITDA forecasts will change. The order of magnitude will differ by company and lease portfolio composition. The first step is to measure the effect of these changes and determine if the new standard triggers the need to modify any existing covenants. Again, easier said than done. There may be some difficulty pegging the ratios to request. Whether an asset manager is trying to follow trends within the portfolio, or a real estate director is trying to create a longrange plan for a current data center under variable occupancy options, the addition of more factors to the equation will add complexity to the task and to the decision making process. The introduction of estimates into the process makes the forecast of key-performance metrics expenses, liabilities, assets much more difficult. Planning for covenant compliance will be challenging given the abandonment of contracted lease terms in the calculation and their replacement with subjectivity in facts and circumstances. Many agreements have the concept of frozen GAAP embedded in the covenants where reporting for compliance can be done under the old standard. While this option may provide some initial relief from breaching covenants, reconciliation processes for companies with many leases will become tedious, as two sets of books are maintained. There s a lot to do. Given the massive number of companies with agreements requiring amendments, there will almost certainly be a shortage of available resources to facilitate the changes. Companies should begin the process of measurement now in order to be proactive in securing changes to contracts. Table 9 volatility Estimating ranges for loan covenants will present challenges if costs associated with leasing activity are material to financial reporting. Many ratios will be less predictable and have broader ranges. EXPENSE PATTERN UNDER SAME LEASE VOLATILITY CAUSED BY NEW STANDARD AND RENEWAL OPTIONS Cash Flow 1,400,000 1,300,000 Straight Line 1,200,000 Current Standard 1,100,000 Ten yr w two 5 yr renewal 1,000,000 10/5/5 No Renewal Lease has no renewal clause 900,000 10 yr, then 5, then 5 15/5 Probable Term 800,000 Ten yr lease w two 5 yr renewal 700,000 "Most likely" 15, then 5 15 /5 w Remeasure Yr 12 600,000 500,000 Ten yr lease w two 5 yr renewal "Most likely" 15, but remeasure at yr 12 Yr 1 Yr 5 Yr 10 Yr 15 Yr 20 11
PROJECT TEAM: DEDICATED RESOURCES The distance to the finish line will differ from company to company, as each has a different starting point. Organizational structure, technical resources and database sophistication will play a major role in maneuvering the transition successfully. The distance to the finish line will differ from company to company, as each has a different starting point. Organizational structure, technical resources and database sophistication will play a major role in maneuvering the transition successfully. Companies with significant lease obligations need to determine whether centralized management of lease data and documents is currently available or can be enhanced with software to manage lease transactions before and after the new standard is adopted. A project team appointed early in the process can develop an enterprise-specific action plan that identifies the tasks and timeline for all disciplines finance, CRE, information systems, legal, taxation, treasury, and so on. Additionally, such a team can identify whether external service providers are required for specialized software, database management, or other functions. If a 2013 transition is recommended, it will be a challenge for external software providers to complete new program modules and roll them out nationally, in multiple locations in less than a year. Early coordination with external service providers is recommended. OTHER Other issues of relevance to businesses reviewing the change include: a. IFRS Convergence If there is convergence with IFRS in the future, it is possible that private (non-listed) companies could adopt IFRS for SMEs, which retains operating lease treatment. There has been no discussion from FASB thus far on the discrepancy that exists between the application of this standard on private companies in the US versus the retention of operating lease reporting under the lighter IFRS standard. b. Complex tenancies Sublease arrangements will require the lessee to perform additional steps in the recording calculation as it steps into the lessor role. Build-to-suit arrangements generally have a long lead time from lease inception to lease commencement. Additional guidance will be needed to determine discount rates, estimates of base year or other factors that would adjust the ROU asset at commencement. Phased tenancies will require phased ROU calculations as well. 12
c. Lessor Considerations If the fair-value option moves forward in the US, lessors will direct their focus to the selection of an appraisal methodology and internal or external resources to support the process. Lessors may have land-lease obligations under their buildings. Given the general length of these agreements and the existence of long-renewal terms, the determination of lease term will be of significant consequence. Under the performance obligation method, a lease-receivable asset will arise for recording Even though it is presented net with the performance obligation, the receivable will fall under impairment review standards. 5. SUMMARY CHARTING YOUR COURSE Step one: March 2009 Discussion Paper Step two: August 2010 Exposure Draft Step three: Final standard 2011 Yes, FASB and IASB really intend to replace operating leases with Right-of-Use lease accounting. Needless to say the global conversion of operating leases to Right-of-Use assets and debt obligations will draw commentary from every corner of commercial real estate. Regardless of whether the opinion expressed supports or opposes the change, the standard setters have made it clear that this is the direction and shape the new standard will take. Will some provisions change between now and the final standard? Certainly. This depends, however, on the volume and quality of the comment letters forwarded during the 120-day comment period. The standard as proposed in the Exposure Draft has already been heartily debated for over 17 months by experienced standard setters and working group representatives from a broad range of leasing activity. In short, the recommendations were not casually made. Rebuttal and refinement are likely to happen, but a complete reversion and return to operating leases is not on the map. Time to develop an action plan Perhaps the first step for business is to participate in the process and submit a comment letter to the standard setting bodies. While the Exposure Draft does not define the timeline to implementation, it has been agreed that the final standard will be released next year (2011). Up to this point, not enough discussion time has been dedicated to the issue of preparation. This is why the comment letters are so critical. 13
In the meantime, many of you will be negotiating agreements in the next 24 months. What performance targets do you want to set? What covenants and ratios are reasonable? Can you enhance definitions? Even though GAAP can be frozen, do you want to retain two sets of books for an indefinite period of time? In the meantime, many of you will be negotiating agreements in the next 24 months. What performance targets do you want to set? What covenants and ratios are reasonable? Can you enhance definitions? Even though GAAP can be frozen, do you want to retain two sets of books for an indefinite period of time? The answers to these questions and more lie in the collection and analysis of your lease agreements. Make good use of the time remaining until the final standard is released. Covenant and business process restructuring could be extensive, and the introduction of new modules of complex enterprise reporting systems is time consuming a delay in planning could lead to a logjam as the transition date approaches. While the goal for standard setters is transparency and decision-useful financial reporting for investors, unnecessary complexity should not be allowed to interrupt the focus, clarity or vision of our business leaders as a result of this change. One is hopeful that in response to further deliberations and business commentary during the comment period, the final standard that emerges next year will have some of the complexity and subjectivity removed. Cushman & Wakefield will continue to monitor all developments that are critical to the commercial real estate industry and assist our clients with transition planning for the new standard and ongoing planning for real estate portfolios. 14
ABOUT THE CFO ROUNDTABLE PROGRAM The CFO Roundtable is the preeminent forum for CFO leadership and innovation. It is an invitation-only series of quarterly events designed by and for CFOs and other senior finance executives on topics relevant to the CFO community. The program and its events facilitate regionally driven, peer-to-peer discussions that deliver practical value. The interactive format engages attendees and provides new ideas to drive business performance. In addition, the initiative builds meaningful relationships within the CFO community and participating sponsors. Created by Cushman & Wakefield, in partnership with The University of Georgia s Terry College of Business, the initiative has been a success. Following the initial launch in June 2005, the program is expanding across North America. In association with top-tier business schools, the CFO Roundtable is active in 13 markets and continues to grow. The program will ultimately reach an estimated 12,000 CFOs and senior finance executives. For more information about this briefing and the CFO Roundtable, visit www.cwcforoundtable.com or contact: Jen Bolk Director 404.853.5398 jen.bolk@cushwake.com ABOUT THE GLOBAL CONSULTING GROUP Cushman & Wakefield s Global Consulting Group provides services that are unique in the commercial real estate services industry. Comprised of business and real estate consulting professionals with technical expertise across numerous specialty practices, Global Consulting designs real estate platforms for clients that enable better business performance and productivity, increasing revenues and reducing costs. For more information about the Global Consulting Group, please contact: Andrew Ratner Executive Managing Director Global Consulting Group 213.629.6562 andrew.ratner@cushwake.com For more information about this briefing, please contact: Margo McConnell, CPA Director, Global Transaction Consulting Cushman & Wakefield of Florida, Inc. Direct 813.204.5353 Cell 813.846.5244 margo.mcconnell@cushwake.com Len Tiso, CFA, CPA Manager, Transaction Consulting Global Consulting Group Cushman & Wakefield of California, Inc. 213.955-5167 len.tiso@cushwake.com 15