Motorcoach operators must prepare for new lease accounting standards
By Ray Sullivan
Motorcoach companies preparing for 2013 will need to be ready for new FASB/IASB lease accounting standards , as well as anticipated cuts to bonus depreciation. Accounting changes are expected to be finalized sometime next year and implemented over the following few years. This will significantly impact the income statements and balance sheets of motorcoach companies that use leases as a financing solution, as the new rules will call for the capitalization of lease payments on the balance sheet.
These changes could reduce the ability to expense depreciation and further affect TRAC lease accounting. Although leasing will remain a convenient and innovative financing offering for fleet owners to secure upgraded or additional equipment, motorcoach company finance officers are encouraged to meet with their legal and accounting advisors to start the necessary preparations to ensure smooth compliance when the changes take effect.
Regarding financial advice for owners:
1. Invest in a professional accounting firm and good accounting software to prepare your financials. Quality, accurate financials will speed the underwriting process and will allow you to have a better understanding of the true profitability and financial condition of your company.
2. When seeking financing for your business, provide the bank or finance company with a well-defined reason for your new purchase. Are you replacing an older coach to reduce maintenance costs? A well laid out justification will help the bank or financial institution make a decision and provide financing structure that meets your specific needs.
3. Keep your personal and corporate credit as clean as possible. In this highly automated world, banks and financial firms can instantly tell if you’ve been making your lease/loan payments in a timely manner. A clean credit history provides the ability to borrow during tougher economic times. Poor pay history is a blight for many years and will make borrowing during downturns very difficult.
BIO: Ray Sullivan is the national sales manager of EverBank Commercial Finance’s Industrial Platform.