India New Lease Accounting Standards - Are Office Occupiers up for the Challenge March 2019
Under the new accounting standards, all leases by a company (including real estate and tangible property such as equipment and vehicles) would now be treated as equal assets and liabilities on their balance sheets. This could have a significant bearing on a company’s financial standing.
This change in accounting standards would reflect a more transparent picture of a company’s financial position and eliminate the need for credit rating agencies to standardize financial statements across companies.
The effective date for adopting these new standards for public companies is January 1, 2019 or the first fiscal year beginning after December 15, 2018 and for private companies is January 1, 2020 or first fiscal year beginning after December 15, 2019 (based on reporting conditions).
This report looks at the impact of the change in accounting standards on India’s office market – given the dominance of global occupiers in the country. Currently, occupiers in India are taking a slightly longer time to make RE decisions along with adding flexibility to their office portfolios.
While individual real estate decisions may be revisited, however, the larger real estate market dynamics in India - in terms of quantum or sentiment are not going to be driven purely by accounting considerations.