Lease Accounting Updates

FASB Releases Lease Accounting Update to Improve Reporting Troubled Debt Restructurings

The Financial Accounting Standards Board issued Accounting Standards Update No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. The update will improve financial reporting by creating greater consistency in the way GAAP is applied for various types of debt restructurings.
The update clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.
“The increase in loan modifications caused by the recent economic downturn led investors, regulators, and practitioners to ask the Board to clarify what types of modifications should be considered troubled debt restructurings for accounting and disclosure purposes,” said FASB Chairman Leslie Seidman. “This update provides that guidance, resulting in greater consistency and transparency in the reporting of these transactions.”
For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. For nonpublic entities, the amendments in the update are effective for annual periods ending on or after Dec. 15, 2012, including interim periods within that annual period. Early application is permitted. The update is available at http://us.lrd.yahoo.com/_ylt=Ajc2.sZ1xDRX7CwvQjuvPN3jba9_;_ylu=X3oDMTE0azhwcmUxBHBvcwMxBHNlYwNuZXdzYXJ0Ym9keQRzbGsDd3d3ZmFzYm9yZw--/SIG=15vl06cer/**http%3A/cts.businesswire.com/ct/CT%3Fid=smartlink%26url=http%253A%252F%252Fwww.fasb.org%26esheet=6673048%26lan=en-US%26anchor=www.fasb.org%26index=1%26md5=edb557490e174acf4df4e49c6eb0aaff.
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants.

Medical Equipment Rental to Reach $56B by 2017

Global Industry Analysts announced the release of its report on medical equipment and leasing and predicts the global market will reach $56 billion by 2017. Major factors propelling market growth include growing incidence of chronic diseases, driving the demand for diagnosis and in turn the need for medical equipment; technological advancements leading to the obsolescence of old equipment; surging prices of medical equipment; and the need to curb healthcare expenses. Healthcare service and equipment providers are increasingly turning to leasing as an economical option for acquiring costly medical equipment and devices.
The report notes rental and leasing of medical devices is fast catching up in the healthcare sector, repelling the traditional loan and credit purchase system. Rental and leasing of medical equipment is an affordable and quick solution for hospitals, nursing homes, and physicians constrained by limited funds due to the recent global economic recession. Leasing enables saving working capital, gives option for purchasing the equipment, and allows upgrades to new technology. Commonly leased medical equipment includes X-ray machines, ultrasound systems, patient-monitoring equipment and laboratory equipment.
Leasing is growing as the most preferred alternative method for financing medical technology in countries such as France, Germany and the U.K. due to the budgetary constraints faced by most of the hospitals in Europe. The German medical equipment market is the largest in the European region. The U.S. represents the next important market for medical equipment, trailing behind the Europe. However, growth is expected from the rest of the world market, which is forecast to exhibit the fastest compounded annual growth of more than 7.0% during the analysis period.
The penetration of medical equipment lease financing in the U.S. has been relatively low until about five years ago, owing to the lack of awareness about leasing, reduction in reimbursements and regulations influencing physician referrals. However, the scenario has changed in recent years, with currently about 35% to 40% of medical equipment in the U.S. being leased.
Major players profiled in the report include Access Equipment Leasing, Agfa Finance Group, Baxter Capital, Elekta Group, GE Healthcare Financial Services, Hill-Rom Holdings, IBM Global Financing, Philips Medical Capital, Siemens Financial Services and Stryker Corporation.

Equipment Leasing Finance Industry Update

ELFA Survey: ‘What’s Hot, What’s Not’ in 15 Equipment Leasing, Finance Industries

The medical equipment, oil/gas/energy and machine segments of the equipment finance industry have the most optimistic outlook for 2011, according to a recent survey of asset managers and consultants by the Independent Equipment Company in cooperation with the Equipment Leasing and Finance Association.
The results of the 2011 “What’s Hot/What’s Not” Equipment Leasing Trends Survey, to be released at the ELFA Equipment Management Conference in St. Petersburg, Fla., reveal that industry perceptions of 15 equipment markets are split, but show considerable improvement over 2010. The results indicate the industry is returning to pre-recession levels and a greater volume of equipment is expected to be leased in 2011 than in 2010.
Survey respondents ranked 15 equipment types as follows, in order from highest-rated to lowest-rated:
1. Medical equipment
2. Oil/gas/energy
3. Machine tools
4. Truck/trailer
5. Hi-tech/computers
6. Aircraft
7. Rail
8. Containers/chassis
9. Construction
10. Telecom
11. Marine/Intercoastal
12. Automobiles
13. Plastic
14. Furniture/fixtures/equipment
15. Printing
The full report and survey methodology are available on the ELFA website at http://www.elfaonline.org/ind/topics/AssetMgmt/.
The 2011 “What’s Hot/What’s Not” Equipment Leasing Trends Survey was conducted in January and February 2011. A total of 155 industry professionals responded to the six-question online survey, of which 93 percent were lessors, asset-based lenders or financial advisors and seven percent were service providers. For more information, visit http://www.elfaonline.org/ind/topics/AssetMgmt/.
The Equipment Leasing and Finance Association is the trade association that represents companies in the $521 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. Its more than 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. In 2011, ELFA is celebrating 50 years of equipping business for success.

CEO's say that they will increase capital spending

In terms of the overall U.S. economy, member CEOs estimate real GDP will grow by 2.9% in 2011, an increase from the 2.5% expected in the fourth quarter.
According to the survey, 92% of CEOs expect their companies’ sales to increase in the next six months, a 12% increase from the fourth quarter of 2010. Meanwhile, 62% expect their companies’ capital spending to increase, compared to 59% in the fourth quarter, while 52% expect their companies to hire more workers, up from 45% last quarter.
The survey was completed between Feb. 28 and March 18 and responses were received from 142 member CEOs.

http://blogs.wsj.com/economics/2011/03/30/ceos-expect-to-boost-sales-hiring-spending/?mod=WSJBlog&mod=marketbeat#

Capital Spending on the Rise

As Equipment Purchasing Surges, Unemployment Remains High

Many companies are ramping up equipment purchases to boost productivity, reinforcing a gap between capital spending and employment in the United States.
Corporate investment will rise 11 percent this year as sales pick up, following a 15 percent gain in 2010, according to “Man vs. Machine,” a Feb. 2 report from Bank of America Merrill Lynch. Employment will grow just 1.7 percent, after a 0.7 percent increase last year.
Inventory rebuilding, low borrowing costs and government policies that include a new tax break on equipment purchases are powerful spurs for capital spending, said Neil Dutta, the Bank of America economist behind the report. The job market lacks such drivers and will form a “mediocre” underpinning for household spending, the biggest part of gross domestic product, he said.
The Institute for Supply Management’s manufacturing index has risen for seven consecutive months, surging in February to the highest level since May 2004. Although the labor market is “improving gradually,” unemployment remains “elevated,” according to the Federal Reserve. The jobless rate could hold at 8.9 percent in March for a second month, the lowest since April 2009, based on the median forecast in a Bloomberg News survey ahead of Labor Department figures due April 1.

Equipment Leasing Industry Find Companies Are Purchasing Equipment Again

(Reuters) - A key measure of U.S. business activity rose sharply in February from a year ago, as companies borrowed more to invest in their operations, but the reading was down slightly from the prior month and credit quality eased, a lender group told Reuters on Tuesday.

The Equipment Leasing and Finance Association (ELFA) said U.S. businesses originated $4.1 billion in loans, leases and lines of credit in February to invest in everything from computer hardware to office furniture and machinery.

That was slightly below January's $4.2 billion total and well below December's $9 billion figure, but up 28 percent from a year ago, when the U.S. economy was beginning its gradual recovery.

February marked the 10th consecutive month of year-over-year gains, and the third straight month such gains were above 20 percent.

"It's a nice, steady trendline up," said ELFA President and CEO William Sutton. "Everything we are seeing throughout the economy (points to) steady, albeit slow, growth."

http://www.reuters.com/article/2011/03/22/us-usa-economy-elfa-idUSTRE72L4Y120110322

Wind Turbine Installations May Rise 20% in 2011, GWEC Lobby Group Says

Wind turbine installations may rise 20 percent this year worldwide and double by 2015, the Global Wind Energy Council said in a statement today.

Capacity to produce electricity from the wind may rise by 40 gigawatts in 2011 from 294.4 gigawatts at the end of last year, the lobby group said in a statement from Brussels. By 2015, it forecasts 450 gigawatts.
“2010 was a tough year for our industry, but 2011 is looking up,” said Steve Sawyer, secretary general for GWEC. “We’ve paid the price for the 2008 and 2009 financial crisis. Now we’re back on track.”  

Source: Bloomberg