KPMG Partner Expects Leasing to Continue After Implementing New Reporting Standard

Kimber Bascom, partner in the KPMG Department of Professional Practice, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Bascom downplayed concerns that the new leases standard will end leasing activity.

“There are many good reasons why leasing activity will continue to go on even after the accounting standards change,” he said.

Some lessees lease for tax reasons, Bascom said. Bascom also noted that leasing provides flexibility to lessees and gives them access to properties that they otherwise wouldn’t be able to purchase on their own.

“There’s a scale and access issue that will continue to exist after the standards change,” he said.

However, the new standard will still impact the industry, according to Bascom.

“As the accounting standards change, there is likely to be more focus on the economics of these transactions as a result of the fact that lessees are going to put them on balance sheets,” he said. Lessors might face more pricing pressure, for instance, Bascom said. Lessees also might ask lessors to structure transactions differently to accommodate their balance sheets.

Overall, lessors will likely be the least impacted by the accounting changes, according to Bascom.

“Lessors of real estate, in particular, should be very happy with the extent of the minimal changes that they’re going to have to deal with in the new accounting standards,” he said.

According to Bascom, other issues that could materially impact the REIT industry include the Financial Accounting Standards Board’s (FASB) project on how to define a business.

“That could affect the way that people who transact with real estate properties account for those transactions,” he said.