Private and nonprofit organizations faced a tall order in February 2016. That’s when the Financial Accounting Standards Board issued new accounting standards requiring lessees to report real estate liabilities on their balance sheets. The standard was set to take effect by mid-December 2019, but FASB issued a one-year extension in October that gives such companies more time to compile, understand and calculate leasing data. The original deadline will remain unchanged for large public banks. As an article published by BOMA International explains, over 85% of lease commitments aren’t listed on corporate balance sheets. Once the new standard kicks in, any equipment or real estate lease with a term longer than 12 months must be recorded on the balance sheet as a “right-of-use” (ROU) asset with a corresponding lease liability. The standards won’t change landlords’ operations much, but tenants will demand improved transparency in their lease agreements. The impact will be especially dramatic for retailers, chain restaurants and other sectors that rely heavily on leasing for their operations. The new reporting requirements will force companies to be more rigorous in recording leasing data and the types of information that must be tracked. “Transparency around contract details will be critical,” according to Stephen Miller, global lease accounting lead for JLL and author of the BOMA article. One key change requires renewal options to become part of lessees’ reported liability if a company is reasonably certain it will exercise its option to renew. Shorter leasing terms will reduce reported liabilities, and operating and service contracts will be excluded from balance sheet calculations. Some experts calculate that corporate debt loads will increase by an average of 58% under the new rules. Rising debt loads elevate a company’s overall financial risk and can set off alarms with investors and...