Mazuma Capital Partners: New Leasing Proposals Continue to Draw Heat

Mazuma Capital Partners: New Leasing Proposals Continue to Draw Heat: The lease accounting debate rages on as the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IA...

New Leasing Proposals Continue to Draw Heat

The lease accounting debate rages on as the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) pore over nearly 800 public comment letters that question proposed new leasing standards. Board officials hit the conference circuit last month to answer detractors, clarify the exposure drafts they released to the public in August 2010, and talk about adjustments they are making to the original proposals.

Among the topics continuing to grab plenty of attention is the “right-of-use” asset concept, which, if approved, would require companies to capitalize operating leases they could traditionally keep off their balance sheets, such as those for real estate and equipment. The boards are also modifying their treatment of lease-renewal options, short-term leases, and variable lease payments.

Under the original exposure draft, companies would have been required to include in their lease term (and record on the balance sheet) any renewal period they were likely to exercise. Under the new proposal, lessees would account for a renewal period only if they had “significant economic incentive to exercise” that option.
In a client advisory earlier this year, Ernst & Young said such an economic incentive might include renewal rates priced at a bargain, penalty payments for relocating, or significant installment costs expended. One possible scenario suggested by Bill Bosco, a member of the IASB working group (external subject-matter experts who provide input to the board): a company that invests millions of dollars to renovate a store may be required to account for the renewal period because it would be compelled to recover its costs by extending the lease. This adjustment to the lease term, Bosco says, pushes the standard closer to current generally accepted accounting principles.
The proposed adjustments also remove some of the complexity for companies that hold leases for less than one year; under the draft rules, those short-term leases would still be considered a rent expense and would not be placed on the balance sheet. The new exposure draft also allows companies to keep certain variable lease payments off their balance sheets.
While those moves may placate some of the criticism leveled at the new proposals, one of the most controversial, and central, aspects of the lease-accounting changes has not been modified: abandoning the use of a straight-line average rent expense over a contract’s term in favor of a system requiring companies to front-load their rent expense on the income statement by splitting it into an amortization expense and an interest expense.
This aspect of the standard, Bosco says, does not reflect the reality of most leases. “We’d rather that companies’ lease costs. . .be represented in their financial statements in a way that represents the economic effect of a lease transaction, which we think is a level, monthly lease cost,” he says.
Ultimately, the proposed standard leaves more to interpretation than current rules, says Mindy Berman, managing director at Jones Lang Lasalle, a real-estate services firm. “There are a lot of subjective evaluations and a lot of nuances that will definitely affect companies’ implementation,” she says. Berman believes finance will have to partner more closely with business units to sort through them all.
The IASB and FASB plan to release the revised exposure draft for further public comment at the beginning of 2012, and hope to have a final rule in place by the end of the year.

Source: CFO.com

Tax breaks on business equipment to be scaled back

Two generous tax breaks small-business owners received during the recession are going to shrink dramatically in 2012. That makes year-end tax planning more important than usual.

The changes affect the deductions for purchases of equipment. One is called the Section 179 deduction, named for a provision of the Internal Revenue Code. The other is called bonus depreciation. Congress approved the breaks to make it easier for small businesses to expand and hire workers. Although the economy is still slow, the breaks are being scaled back.

Ed Smith, a tax partner at the accounting and consulting firm BDO in Boston, says he's talking with clients about whether it makes sense to buy equipment before the changes take effect.

"Understand that we're not going to have this deduction in the next couple of years," he said.

The Section 179 deduction allows a small business to deduct upfront rather than depreciate the cost of equipment, such as computers, vehicles, machines in manufacturing, office furniture and sheds.

The deduction for 2011 is $500,000. In 2012, it will drop to $125,000. And in 2013, it's expected to fall to $25,000 — the amount it was back in 2002.

Bonus depreciation allows small businesses to take a deduction for equipment expenses beyond the amount allowed under Section 179. For 2011, the bonus depreciation is 100 percent. The maximum that can be deducted under the two deductions combined is $2 million. In 2012, bonus depreciation drops to 50 percent.

Under normal depreciation rules, the cost of equipment is deducted over a number of years according to a formula set by the IRS. So the Section 179 and bonus depreciation provisions have given small businesses accelerated tax savings.

You can learn more about the deductions in IRS Publication 946, "How to Depreciate Property." It goes into detail about the deductions and the regulations that govern how they can be taken. For example, the Section 179 deduction can't be used for your new heating and air conditioning unit. But that equipment can be depreciated.

It's also a good idea to discuss your plans with an accountant or tax attorney.

Changes in the tax law shouldn't be the biggest reason for buying equipment. Deductions aren't worth it if you're wasting your money on something your business doesn't need. But if you've been debating whether to buy tablet computers for your employees or install manufacturing equipment in 2011 or in 2012, it might make sense to move the purchase into this year. If you can get a better price than you would next year, that's another reason to buy now.

A big caveat: The equipment has to be up and running by Dec. 31. You can't order a new server or drill press this year, have it delivered in January and still take the deduction. You have to be able to use it — which means it needs to be installed — by the end of the year. However, it's OK if you don't pay for the equipment until next year, or if you're going to take several years to pay it off.

Something else to think about is whether you want to take advantage of these deductions now. You're not required to use Section 179 and bonus depreciation. In fact, you need to elect to take a Section 179 deduction when you file IRS Form 4562, "Depreciation and Amortization."

Depending on what your profits look like this year, and what they're likely to be in the coming years, you might prefer to use regular depreciation. So you might want to postpone your purchase until next year.

Smith says the money owners will save on their taxes from Section 179 and bonus depreciation can help them pay for the equipment they've bought. But using these deductions will eliminate any tax savings you would have had from depreciating equipment over time. Smith points out that when equipment is depreciated under regular rules, the tax savings from that can be used to cover principal payments if the equipment was financed. And the interest on financing is deductible.

Again, it's a good idea to consult a tax professional to decide which approach makes the most sense for your business.

Source Modesto Bee www.modbee.com

Medical equipment leasing holds steady

It may come as a surprise in the current economy, but prospects for medical equipment leasing are looking good – and not just compared to other vertical markets.

And those figures aren’t small. The U.S. Bureau of Economic Analysis estimates that businesses invested about $81.6 billion in health care equipment in the year 2010. With approximately 62 percent of all U.S. health care equipment being financed, that brings the health care equipment finance marketplace to an estimated $506 billion in 2010, according to the Bureau, as reported by the Equipment Leasing and Finance Association (ELFA).

According to a 2011 survey by the Independent Equipment Company together with ELFA, medical equipment has been rated – for the sixth year in a row – as the type of equipment finance companies anticipate to have the greatest total dollar amount of new business volume.

Recent statistics bear this out; ELFA has found that member companies financed for medical imaging and electronic devices increased from 4.4 percent in 2009 to 4.5 percent in 2010.

This is not a decades-long trend, according to Global Industry Analysts (GIA). The research firm notes that medical equipment lease financing in the United States had been relatively low until five or six years ago, due to lack of awareness about leasing, reduction in reimbursements, and heavy regulations influencing physician referrals. But recently, note the researchers, health care institutions have come to see leasing medical equipment as an affordable and quick solution that saves working capital, provides options for purchasing the equipment, and facilitates upgrades to new technology.

IT is the “it” product

While medical equipment leasing has been stable, the software arena has experienced tremendous growth, particularly with the added interest in electronic medical records (EMR). “Every year over the past three years, medical leasing in IT has almost doubled,” explains French. “The tax incentive is definitely driving the market. It’s a phenomenon.”

The trend is expected to continue. GIA anticipates that medical IT equipment leasing and rentals will reach $56 billion by 2017. Interestingly, GIA notes that Europe is the single largest regional market for medical equipment rental and leasing worldwide, with the practice being particularly popular in Germany, France, and the United Kingdom. The United States is next in line in market share.

Read entire article: http://www.dotmed.com/news/story/16907

Chairman Ben S. Bernanke

Economic Outlook and Recent Monetary Policy Actions

Before the Joint Economic Committee, U.S. Congress, Washington, D.C.

October 4, 2011

Chairman Casey, Vice Chairman Brady, and other members of the Committee, I appreciate this opportunity to discuss the economic outlook and recent monetary policy actions.
It has been three years since the beginning of the most intense phase of the financial crisis in the late summer and fall of 2008, and more than two years since the economic recovery began in June 2009. There have been some positive developments: The functioning of financial markets and the banking system in the United States has improved significantly. Manufacturing production in the United States has risen nearly 15 percent since its trough, driven substantially by growth in exports; indeed, the U.S. trade deficit has been notably lower recently than it was before the crisis, reflecting in part the improved competitiveness of U.S. goods and services. Business investment in equipment and software has continued to expand, and productivity gains in some industries have been impressive. Nevertheless, it is clear that, overall, the recovery from the crisis has been much less robust than we had hoped. Recent revisions of government economic data show the recession as having been even deeper, and the recovery weaker, than previously estimated; indeed, by the second quarter of this year--the latest quarter for which official estimates are available--aggregate output in the United States still had not returned to the level that it had attained before the crisis. Slow economic growth has in turn led to slow rates of increase in jobs and household incomes.
The pattern of sluggish growth was particularly evident in the first half of this year, with real gross domestic product (GDP) estimated to have increased at an average annual rate of less than 1 percent. Some of this weakness can be attributed to temporary factors. Notably, earlier this year, political unrest in the Middle East and North Africa, strong growth in emerging market economies, and other developments contributed to significant increases in the prices of oil and other commodities, which damped consumer purchasing power and spending; and the disaster in Japan disrupted global supply chains and production, particularly in the automobile industry. With commodity prices having come off their highs and manufacturers' problems with supply chains well along toward resolution, growth in the second half of the year seems likely to be more rapid than in the first half.
However, the incoming data suggest that other, more persistent factors also continue to restrain the pace of recovery. Consequently, the Federal Open Market Committee (FOMC) now expects a somewhat slower pace of economic growth over coming quarters than it did at the time of the June meeting, when Committee participants most recently submitted economic forecasts.
Consumer behavior has both reflected and contributed to the slow pace of recovery. Households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit. Probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market. Over the summer, private payrolls rose by only about 100,000 jobs per month on average--half of the rate posted earlier in the year.¹ Meanwhile, state and local governments have continued to shed jobs, as they have been doing for more than two years. With these weak gains in employment, the unemployment rate has held close to 9 percent since early this year. Moreover, recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead.
Other sectors of the economy are also contributing to the slower-than-expected rate of expansion. The housing sector has been a significant driver of recovery from most recessions in the United States since World War II. This time, however, a number of factors--including the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of "underwater" mortgages (on which homeowners owe more than their homes are worth)--have left the rate of new home construction at only about one-third of its average level in recent decades.
In the financial sphere, as I noted, banking and financial conditions in the United States have improved significantly since the depths of the crisis. Nonetheless, financial stresses persist. Credit remains tight for many households, small businesses, and residential and commercial builders, in part because weaker balance sheets and income prospects have increased the perceived credit risk of many potential borrowers. We have also recently seen bouts of elevated volatility and risk aversion in financial markets, partly in reaction to fiscal concerns both here and abroad. Domestically, the controversy during the summer regarding the raising of the federal debt ceiling and the downgrade of the U.S. long-term credit rating by one of the major rating agencies contributed to the financial turbulence that occurred around that time. Outside the United States, concerns about sovereign debt in Greece and other euro-zone countries, as well as about the sovereign debt exposures of the European banking system, have been a significant source of stress in global financial markets. European leaders are strongly committed to addressing these issues, but the need to obtain agreement among a large number of countries to put in place necessary backstops and to address the sources of the fiscal problems has slowed the process of finding solutions. It is difficult to judge how much these financial strains have affected U.S. economic activity thus far, but there seems little doubt that they have hurt household and business confidence, and that they pose ongoing risks to growth.
Another factor likely to weigh on the U.S. recovery is the increasing drag being exerted by the government sector. Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain.
To be sure, fiscal policymakers face a complex situation. I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.
A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term. Third, fiscal policy should aim to promote long-term growth and economic opportunity. As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term. Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy. In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.
Returning to the discussion of the economic outlook, let me turn now to the prospects for inflation. Prices of many commodities, notably oil, increased sharply earlier this year, as I noted, leading to higher retail gasoline and food prices. In addition, producers of other goods and services were able to pass through some of their higher input costs to their customers. Separately, the global supply disruptions associated with the disaster in Japan put upward pressure on prices of motor vehicles. As a result of these influences, inflation picked up during the first half of this year; over that period, the price index for personal consumption expenditures rose at an annual rate of about 3-1/2 percent, compared with an average of less than 1-1/2 percent over the preceding two years.
As the FOMC anticipated, however, inflation has begun to moderate as these transitory influences wane. In particular, the prices of oil and many other commodities have either leveled off or have come down from their highs, and the step-up in automobile production has started to reduce pressures on the prices of cars and light trucks. Importantly, the higher rate of inflation experienced so far this year does not appear to have become ingrained in the economy. Longer-term inflation expectations have remained stable according to surveys of households and economic forecasters, and the five-year-forward measure of inflation compensation derived from yields on nominal and inflation-protected Treasury securities suggests that inflation expectations among investors may have moved lower recently. In addition to the stability of longer-term inflation expectations, the substantial amount of resource slack in U.S. labor and product markets should continue to restrain inflationary pressures.
In view of the deterioration in the economic outlook over the summer and the subdued inflation picture over the medium run, the FOMC has taken several steps recently to provide additional policy accommodation. At the August meeting, the Committee provided greater clarity about its outlook for the level of short-term interest rates by noting that economic conditions were likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. And at our meeting in September, the Committee announced that it intends to increase the average maturity of the securities in the Federal Reserve's portfolio. Specifically, it intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less, leaving the size of our balance sheet approximately unchanged. This maturity extension program should put downward pressure on longer-term interest rates and help make broader financial conditions more supportive of economic growth than they would otherwise have been.
The Committee also announced in September that it will begin reinvesting principal payments on its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities rather than in longer-term Treasury securities. By helping to support mortgage markets, this action too should contribute to a stronger economic recovery. The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability.
Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies--pertaining to labor markets, housing, trade, taxation, and regulation, for example--also have important roles to play. For our part, we at the Federal Reserve will continue to work to help create an environment that provides the greatest possible economic opportunity for all Americans.

Time for Stimulus

Peter Diamond, who won the 2010 Nobel prize in economics but ultimately abandoned a bid to serve on the Federal Reserve, talks with WSJ's Kelly Evans about why he supports "Operation Twist," and why more fiscal stimulus is need to fix the U.S. jobs problem.


http://http://online.wsj.com/video/diamond-we-need-stimulus-now/B5170210-C45C-486A-85F3-D3F7BCF527EE.html

Survey: US Capital-Equipment Financing Strengthened In August

Equipment Leasing and Finance Association survey shows rising loan and leasing activity for capital equipment

--Choppy month-to-month activity attributed to concerns about U.S. economy

--Delinquent loans and leases down from a year ago

  

Financing volume for business equipment grew 33% in August from a year earlier, easing concerns, at least temporarily, that spending on capital equipment is weakening.

Respondents to the Equipment Leasing and Finance Association's monthly survey said they financed $5.7 billion of new equipment last month, compared with $4.3 billion in the year-earlier period. August's volume was flat with July. From January through August, survey respondents provided financing for $43.9 billion of equipment purchases, up 25% from the same period in 2010.

The recovery in the $521-billion-a-year commercial leasing and financing industry from its 2009 doldrums appeared to regain some momentum last month after activity plunged in July following a spike in June. The finance association attributed the recent choppiness to increasing uncertainty about the performance of the U.S. economy.

"It is clear from less-quantitative reporting that equipment-finance executives still believe the storm clouds hovering over our economy have not yet dissipated," said William Sutton, president of the Washington-based association. "Current and future business performance will continue to ebb and flow."

Nevertheless, credit-quality metrics measured in the survey showed across-the-board improvement last month. Credit standards eased in August as the approval rate for loans and leases rose to 77.6% in August from 76.3% in July. Of the companies participating in the survey, more than 60% reported that they submitted more transactions for approval during August, up from 59% in July.

Loans and leases past due by more than 30 days amounted to 2.5% of survey respondents' net receivables in August, down from 4.3% a year earlier and down from 2.7% in July. Loan charge-offs amounted to 0.6% of respondents' net receivables last month, down from 1.3% in August 2010 and down from 0.7% in July.

Survey respondents continued to cite construction, trucking and printing as the industry sectors within their loan portfolios that are underperforming.

The 25 respondents to the Washington association's survey included banks Wells Fargo & Co. (WFC), Bank of America Corp. (BAC) and Fifth Third Bancorp (FITB); independent financing companies including CIT Group Inc. (CIT); and finance units for manufacturers Caterpillar Inc. (CAT), Deere & Co. (DE), Volvo Group, and Dell Inc. (DELL)

Mazuma Capital Funds Hires David M. Eckman as Vice President of Vendor Services

FOR IMMEDIATE RELEASE-

DRAPER, UTAH SEPTEMBER 23, 2011–Mazuma Capital Corp announced that David M. Eckman has joined Mazuma Capital as the Vice President, of Vendor Services. The Vendor Services division will provide turnkey financing services to vendors, manufacturers and distributors seeking $100,000- $20,000,000.

David brings phenomenal expertise to Mazuma Captial through his extensive background in diversified management and finance.  Prior to joining Mazuma David worked with several financial institutions including Orix Credit Alliance, where he maintained the integrity of transaction fundings and regulatory processes.  David holds a B.S. Business Administration / Finance degree from, Oregon State University.

Mazuma Capital CEO Jared Belnap said, “We are excited about adding David to head up our Vendor Services division.  This division will provide a wide range of customized programs, turnkey solutions, and outstanding service.  David has a strong customer base and process history of developing these programs into successful ventures from his years at Orix and we’re thrilled to see him parlay this expertise into meaningful production, adding to Mazuma’s strong brand and market presence.”

 “I am very excited to join the Mazuma Capital team, and look forward to the continued growth and success of the Vendor Program.   Mazuma has the knowledge, expertise, and resources to position itself strategically into a formidable competitor in Vendor Origination and I’m thrilled to be at the helm in this endeavor.  I look forward to building on Mazuma’s already impeccable reputation as a dependable funding source with the highest level of hands on service.”  Said David M. Eckman, VP of Vendor Services.

About Mazuma: Mazuma Capital is committed to our client’s success. Our unique capabilities and innovative product offerings provide solutions accelerating financial growth. Servicing both rising companies and established businesses, Mazuma continues to secure its position as the middle-market industry leader. We build long-term relationships by delivering on our commitments. Mazuma co-authored the Utah Best Practices Alliance and subscribes to the ELFA Code of Fair Business Practices.

# # #

Media Contact: Julie Fuchs, 801-816-0800 Ext. X291, jfuchs@mazumacapital.com

FASB’s Leasing Convergence Timeline Moves to Next Year

Accounting Today reported that in an interview with staff members, FASB board chairman Leslie Seidman said many of the priority projects slated for convergence with the IASB probably won’t be settled until next year at the earliest.

Commenting on the completion of FASB’s re-deliberation discussions with the IASB on the leasing project, Accounting Today quotes Seidman as saying, “We are continuing to work through the issues that were raised with the exposure draft.” Seidman added, “We have already decided to re-expose that as well, which again was an extremely well-received decision because people do want an opportunity to look at the revised conclusions in the context of the standard as a whole.”

Once those discussions conclude late this fall, Seidman said the leasing proposals would be re-exposed for 120 days with the IASB. “Likewise, we’re looking at a timeframe of sometime next spring to start the re-deliberations on leasing, depending on the feedback that we get, and we’re looking at re-deliberations after that, with a goal of trying to conclude leasing in 2012,” Seidman is quoted as saying by Accounting Today.

Read entire article:

http://www.accountingtoday.com/news/FASB-Convergence-Timeline-Moves-Next-Year-60035-1.html

2013- The Tax Cliff

President Obama unveiled part two of his American Jobs Act on Monday, and it turns out to be another permanent increase in taxes to pay for more spending and another temporary tax cut. No surprise there. What might surprise Americans, however, is how the President is setting up the U.S. economy for one of the biggest tax increases in history in 2013.

Mr. Obama said last week that he wants $240 billion in new tax incentives for workers and small business, but the catch is that all of these tax breaks would expire at the end of next year. To pay for all this, White House budget director Jack Lew also proposed $467 billion in new taxes that would begin a mere 16 months from now. The tax list includes limiting deductions for those earning more than $200,000 ($250,000 for couples), limiting tax breaks for oil and gas companies, and a tax increase on carried interest earned by private equity firms. These tax increases would not be temporary.

What this means is that millions of small-business owners had better enjoy the next 16 months, because come January 2013 they are going to get hit with a giant tax bill. Let's call the expensive roll:

• First comes the new tax hikes that Mr. Obama proposed on Monday. Capping itemized deductions and exemptions for the rich would take $405 billion from the private economy for 10 years starting in 2013. Taxing carried interest would raise $18 billion, and repealing tax incentives for oil and gas production would get $41 billion.

• These increases would coincide with the expiration of the tax credits, 100% expensing provisions and payroll tax breaks in Mr. Obama's new jobs program. This would mean a tax hit of $240 billion on small business and workers. That's the downside of temporary tax breaks and other job-creation gimmicks: The incentives quickly vanish, and perhaps so do the jobs.

So even if the White House is right that its latest stimulus plan will create "millions of jobs" through 2012, by this logic a $240 billion tax hike on small businesses in 2013 would cost the economy jobs. This tax wallop would arrive when even the White House says the unemployment rate will still be 7.4%.

• January 2013 is also the same month that Mr. Obama wants the

Bush-era tax rates to expire on Americans earning more than $200,000. That would raise the highest individual income tax rate to about 42%, including deduction phaseouts, from 35% today. Congress's Joint Committee on Taxation found in 2009 that $437 billion of business income would be taxed at higher tax rates under the Obama plan. And since some 4.5 million small-business owners file their annual tax returns as subchapter S firms under the individual tax code, this tax increase would often apply to the same people who Mr. Obama is targeting with his new tax credits.

The capital gains and dividend taxes would also rise to an expected 20% rate from 15% today. The 10-year hit to the private economy for all of these expiring Bush rates: about $750 billion.

• Also starting in 2013 are two of ObamaCare's biggest tax increases: an additional 0.9-percentage point levy on top of the 2.9% Medicare tax for those earning more than $200,000, and a new 2.9% surcharge on investment income, including interest income. This will further increase the top tax rate on capital gains and dividends to 23.8%, for a roughly 60% increase in investment taxes in one year.

The White House's economic logic seems to be that its new spending and temporary tax cuts will so fire up investment and hiring in the next 16 months that the economy will be growing much faster in 2013 and could thus absorb a leap off the tax cliff. But this requires its own leap of faith.

The White House also predicted a similar economic takeoff from the 2009 stimulus that was supposed to make a tax hike possible in 2011. Then last December Mr. Obama proposed new tax incentives only for 2011 because the economy was supposed to be cooking by 2012. Now it wants to extend those tax breaks so the economy will be cruising in 2013.

All of this assumes that American business owners aren't smart enough to look beyond the next few months. They can surely see the new burdens they'll face in 2013, and they aren't about to load up on new employees or take new large risks if they aren't sure what their costs will be in 16 months. They can also reasonably wonder whether Mr. Obama's tax hike will hurt the overall economy in 2013—another reason to be cautious now.

For the White House, the policy calendar is dictated above all by the political necessities of the 2012 election. Mr. Obama will take his chances on 2013 if he can cajole the private economy to create enough new jobs over the next year to win re-election, even if those jobs and growth are temporary. Business owners and workers who would prefer to prosper beyond Election Day aren't likely to share Mr. Obama's enthusiasm once they see the great tax cliff approaching. Look out below.

Source: WSJ

Now Through December 31st 4.9% Financing Available for Qualified Customers.

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President Calls for Expensing for Plants and Equipment for 2012 as Component of Jobs Package

President Calls for Expensing for Plants and Equipment for 2012 as Component of Jobs Package

On September 8, President Obama unveiled a proposal calling for a 100% tax deduction for plants and equipment for 2012 as a key component of the Administration’s new $447 billion American Jobs Act. The proposal calls for a full deduction of qualified capital investments through December 31, 2012 and allows all firms-large and small-to take an immediate deduction on investment in new plants and equipment.

Under current law, business are generally allowed to immediately deduct 100% of the cost of qualified property placed in service in 2011, and take 50% "bonus depreciation" on the cost of property placed in service in 2012. The President's proposal would extend the 100% expensing provision through the end of 2012. For the 100% expensing provision, this proposal also extends the longer placed in service date for property placed in service before January 1, 2014 for certain longer-lived and transportation property. The 50% bonus depreciation provision is not changed, but would be subsumed by the 100% expensing proposal in 2012. The expensing proposal is estimated to cost $5 billion over a ten year budget window.

On September 12, the President announced his recommendations to pay for his jobs plan including proposals to: tax "carried interest" in investment partnerships as ordinary income, repeal certain oil and gas provisions, limit certain individual itemized deductions and exclusions to a 28% tax rate, and lengthen the depreciation schedule for general or corporate aircraft to seven years.

Notably, the President recommended that new bicameral, 12-member congressional Joint Select Committee on the Deficit (the “Supercommittee”), be charged with finding the necessary revenue to pay for this plan as well as finding an additional $1.5 trillion in deficit reduction cuts over the next ten years (2012-2021).

FMV & OLV – More Than What Meets the Eye

FMV & OLV – More Than What Meets the Eye

Mazuma Capital Corp Funds Used Heavy Machinery for U.S. Central Appalachian Coal Producer - Yahoo! Finance

Mazuma Capital Corp Funds Used Heavy Machinery for U.S. Central Appalachian Coal Producer - Yahoo! Finance:

'via Blog this'

Wall Street Haunted by ‘08 Loses Risk Appetite: Credit Markets

Aug. 29 (Bloomberg) -- Wall Street traders are demanding the biggest premiums to buy and sell credit in almost two years as they seek protections from market swings driven by Europe’s debt crisis and a slowing global economy.

A measure of the cost of trading credit-default swaps has tripled this month as prices gyrate the most in 13 months, according to data compiled by Bloomberg and CMA in London. Amid the volatility, the biggest bond dealers cut their holdings of corporate securities to $73.1 billion as of Aug. 17, the least since July 2009, Federal Reserve data show.

The surge underscores the fragility of credit markets three years after the collapse of Lehman Brothers Holdings Inc. triggered the biggest corporate bond losses in at least 35 years. With junk-rated securities poised to lose the most this month since November 2008, banks and investors are bracing for broader declines on concern Europe’s fiscal imbalances will infect the banking system at a time when the economy may not be strong enough to withstand such headwinds.

“The specter of 2008 still looms large,” said Tom Farina, a managing director at Deutsche Insurance Asset Management, which oversees $200 billion. “People understand that tail risk is still quite large in comparison to the way we used to think about it,” he said, referring to extreme market moves that fall outside probable outcomes forecast by Wall Street.

Bid-Ask Spread

The difference between where dealers will buy and sell the 15 most-traded credit-default swaps on U.S. investment-grade companies has widened to 14 basis points from 4.6 basis points at the start of August, according to market prices compiled by CMA. That’s equivalent to $14,000 on a $10 million contract and up from $4,600. The so-called bid-ask spread has increased to 5.4 percent of the annual cost of the contracts, the most since December 2009 and up from 3 percent on Aug. 1.

“The dealer community is not putting risk on,” said Jason Rosiak, the head of portfolio management at Newport Beach, California-based Pacific Asset Management, an affiliate of Pacific Life Insurance Co. “They’re not cushioning the blow as they once upon a time were, and this leads to more volatility.”

Equipment Finance Industry Confidence Declines in August

 Washington, DC, August 19, 2011 –- The Equipment Leasing & Finance Foundation (the Foundation) releases the August 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today.  Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $521 billion equipment finance sector.  Overall, confidence in the equipment finance market is 50.0, down from the July index of 56.2, indicating apparent industry reaction to U.S. economic conditions and federal government fiscal management and policies.

When asked about the outlook for the future, survey respondent Russell Nelson, President, Farm Credit Leasing Services Corporation, said, “Pent-up demand for replacement assets and improving conditions in select industries may continue to drive strong results for the remainder of 2011.   The key to future business confidence rests with leadership in Washington, DC, and their ability to craft a budget that Wall Street, Main Street, and the global community view positively.”

August 2011 Survey Results:

The overall MCI-EFI is 50.0, a decrease from the July index of 56.2.

•  When asked to assess their business conditions over the next four months, 13.2% of executives responding said they believe business conditions will improve over the next four months, slightly decreased from 14.0% in July.  65.8% of respondents believe business conditions will remain the same over the next four months, a decrease from 81.4% in July.  21.1% of executives believe business conditions will worsen, a sharp increase from 4.7% in July. 
• 21.1% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 14% in July.  57.9% believe demand will “remain the same” during the same four-month time period, a decrease from 74.4% the previous month.  21.1% believe demand will decline, up from 11.6% who believed so in July. 

• 21.1% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 23% in July.  73.7% of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 76.7% the previous month.  5.3% of survey respondents expect “less” access to capital, the first time in nine months any respondents said they expect “less” access to capital.
• When asked, 23.7% of the executives reported they expect to hire more employees over the next four months, down from 32.6% in July.  65.8% expect no change in headcount over the next four months, an increase from 58% last month, while 10.5% expect fewer employees, an increase from 9.6% in July.   

• 55.3% of the leadership evaluate the current U.S. economy as “fair,” down from 72% who did in July.  44.7% rate it as “poor,” up from 27.9% last month. 

• 5.3% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 9.3% in July.  63.2% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 79% in July.  31.6% responded that they believe economic conditions in the U.S. will worsen over the next six months, up from 11.6% who believed so last month.   

• In August, 28.9% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 44.2% in July.  68.4% believe there will be “no change” in business development spending, up from 55.8% last month, and 2.6% believe there will be a decrease in spending, up from no one who believed so last month.  

 August 2011 MCI Survey Comments from Industry Executive Leadership:

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

Bank, Middle Ticket

“Until such time that the federal government can remove the unpredictability related to taxes and fiscal policy the economy will continue to sputter as the business community will be very cautious with respect to additional investment. This scenario will not bode well for the equipment finance industry.”  Executive, Middle Ticket, Bank

Independent, Middle Ticket

“Growth is slower than expected but we are seeing some positive signs of larger capital expenditures.”  Aylin Cankardes, President, Rockwell Financial Group

 Bank, Small Ticket

“Recent actions in D.C. make our environment very uncertain.” Executive, Small Ticket, Bank

Why an MCI-EFI?

Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?

The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies.  The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity.  Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry's confidence.

How is the MCI-EFI designed?

The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment

IASB Pushes Back

Decision On Lease Accounting Rule Changes Likely Pushed Back Until 2012

Inundated with comments and complaints, international accounting rule makers have decided to resubmit proposed changes on how companies account for real estate and capital equipment leases for public comment, a move that will probably delay issuance of a new lease accounting standard until well into next year.

The International Accounting Standards Board (IASB) and the U.S.-based Financial Accounting Standards Board (FASB) have made extensive changes to the exposure draft, released in August 2010 with the stated goal of improving the financial reporting of lease contracts. The boards said the changes would result in a more consistent approach to lease accounting and would improve the quality of financial information available to investors.

However, a four-month public review period brought nearly 800 comments from dozens of organizations representing real estate, equipment leasing, and other business and financial interests in December. Many respondents complained that the rules as proposed would make the standard more complex and inconsistent, with commercial property groups criticizing the changes as a potential threat to the market recovery itself.

Mazuma Capital Funds Million Dollar Transaction for Biofuel Company

Mazuma Capital Funds Million Dollar Transaction for Biofuel Company

Mazuma Capital Funds Million Dollar Transaction for Biofuel Company

Mazuma Capital Funds Million Dollar Transaction for Biofuel Company

ELFF confidence reports

Equipment Finance Industry Concerns Linger in May

The Equipment Leasing & Finance Foundation said the May 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) showed overall, confidence in the equipment finance market is 52.6, down from the May index of 63.2, indicating lingering industry concerns over the sputtering economic recovery and uncertainties in lease accounting changes.

June 2011 Survey Results:

• When asked to assess their business conditions over the next four months, 5% of executives responding said they believe business conditions will improve, a decrease from 30% in May. 79.5% of respondents believe business conditions will remain the same, an increase from 70% in May. 15.4% of executives believe business conditions will worsen.

• 12.8% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 22% in May. 77% believe demand will “remain the same” during the same four-month time period, a slight decrease from 78% the previous month. 10% believe demand will decline.

• 23% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 44% in May. 77% of survey respondents indicate they expect the “same” access to capital to fund business, up from 56% the previous month. In the last seven months’ surveys, no one responded that they expect “less” access to capital.

• When asked, 33.3% of the executives reported they expect to hire more employees over the next four months, down from 41% in May. 53.8% expect no change in headcount over the next four months, an increase from 52% last month, while 12.8% expect fewer employees, an increase from 7.0% in May.

• 66.7% of the leadership evaluate the current U.S. economy as “fair,” down from 93% who did in May. 33.3% rate it as “poor,” up from 7.0% last month.

• Five percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 30% in May. 82% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 63% in May. 12.8% responded that they believe economic conditions in the U.S. will worsen over the next six months, up from 7.0% who believed so last month.

• In June, 28% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 37% in May. 69% believe there will be “no change” in business development spending, up from 56% last month, and 2.6% believe there will be a decrease in spending, down from 7.0% who believed so last month.

MCI-EFI respondents are composed of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at http://www.LeaseFoundation.org.

ELFA Urges Workable Framework for Risk Retention Under Dodd-Frank

ELFA Urges Workable Framework for Risk Retention Under Dodd-Frank

 Banks develop strategy against regulatory onslaught

Major financial institutions are taking a multiprong approach against regulatory changes as officials float the idea of requiring higher capital buffers. Global regulators are discussing how much more capital should be held by systemically important financial institutions. Banks will argue that they shouldn't sit on so much cash and instead should put it to work to help the economy. 

Fair Value Accounting: Five New Disclosure Requirements

Fair Value Accounting: Five New Disclosure Requirements

Operations and IT executives at firms following U.S. accounting standards will soon have a lot more work to do when it comes to valuing their financial instruments.

“Firms will have to review their securities masterfile, data warehousing, portfolio accounting and reporting systems to ensure they have the correct information and can aggregate the information to comply with additional disclosure requirements,” says Rick Martin, vice president of Pluris Valuation Advisors, a New York firm specializing in valuing business entities and illiquid securities.

On May 12, the Financial Accounting Standards Board came out with a 331-page document of changes to its “generally accepted accounting principles,’’ for fair-value accounting used in the United States. The new U.S. requirements will be effective for public companies in any annual report issued after after December 15, 2011. The rules take effect for non-public companies for their annual periods which begin after December 15.

Disclose Numbers.
Firms categorizing any securities in a Level 3 category must now provide quantitative disclosures on each of the unobservable inputs they used. “In the case of a residential mortgage-backed security a firm would have to disclose the prepayment rates used, the probability of default and loss severity, if they used these inputs in their pricing,” says Martin. Just where will they get those figures from? If they did their own securities pricing, they would likely have the figures in proprietary valuation models but if they used a third-party valuation firm they would have make reasonable efforts to obtain the information. Valuation firms currently don’t provide this amount of granular detail.

Disclose Policies.
Firms must also explain just what their valuation policies and procedures are when pricing securities in Level 3. Those valuation policies and procedures involved who at a company makes the final decision about how to price a Level 3 security, why a security was priced as a Level 3 security; and an analysis of changes in fair value measurements. Currently, firms do not report at this level of detail for Level 3 measurements. Therefore, gathering this information will require additional coordination between the front and back offices, says Martin.

Disclose Changes.
Firms will for the first time need to describe in narrative form – aka plain English -- how changes to unobservable inputs will affect the valuation of a financial instrument in a Level 3 category, as well as how those inputs are interrelated. Changes to unobservable inputs that might affect the fair value of a basket of collateralized mortgage obligations could range from offered quotes to comparability adjustments. “Even though firms are not yet required to provide quantitative information for all practical purposes they still need to develop it to form the basis for the new narrative disclosures,” says Martin.

Disclose Reclassifications.
Firms now have to disclose every time they have transferred a financial instrument from a Level One to a Level Two category and why that transfer was made. That’s a far cry from the current practice of only disclosing transfers if the firm thought the value of securities transferred was significant. “Securities an often become a Level Two category from a Level One category if the underlying inputs used to make the fair value measurement change.” For example, if a market that was previously considered active becomes inactive, securities trading on that market will no longer be eligible for Level 1 pricing.

Disclose the Category For All Securities.
Financial instruments that previously only needed to be disclosed at fair-value – and not recorded at fair value -- will now need to be assigned one of the three levels. Case in point: a company might now record a loan at amortized cost and only be required to disclose its fair-value. Under the new rule a company will have to decide which level the loan falls into. “Assigning a level is time-consuming and often involves the collaboration of research, valuation committees and auditors,” says Martin.

Mazuma Capital Funds Multimillion Dollar Transaction for Environmentally Conscience Ground Clearing and Reclamation Services Provider

FOR IMMEDIATE RELEASE-

DRAPER, UT, MAY 25, 2011–Mazuma Capital, an elite national direct lender, announces it has funded a $2.5 million dollar transaction for a privately owned services company. The company is a prominent national player in the ground clearing and reclamation services industry.  Well known for administering environmentally friendly solutions in order to maintain a miniscule ecological footprint.
With major growth and expansions over the past 18 months the company sought funding for new equipment.  The equipment was engineered with superior fuel efficiency in mind; as well as being able to withstand extreme stress and tough terrain while performing its functions. The equipment was vital as it was needed to accommodate the large amount of growth and expanding service contracts in the oil and gas sector, while still providing a level of environmental responsibility. 
The company had obtained new contracts throughout the country to work with utility providers in need of reclamation and mulching services.  The challenge was finding a structure to meet the needs of the company's growth and financial requirements, while not requiring personal guarantees. Mazuma Capital Corp provided a lease structure to procure the ground clearing and mulching equipment for the company.
Mazuma Capital’s experienced underwriters brought their ability to think outside the box, using innovation and their proven track record in securing funding for growing companies to the table. Mazuma was able to structure the lease to meet the company's needs while ensuring it would foster the current growth and help to facilitate new growth.
“Working with Mazuma Capital allowed us to ride the tailwind of our newly signed service contracts with the right equipment in place.  The flexibility Mazuma offered us was refreshing and it was a great fit for our needs,” said the CEO of the Services Company. “The team at Mazuma did not feel like your typical lender/banker, their business is relationship based on every level.  The dynamic throughout Mazuma’s staff was one of professionalism with an added level of personalized service. Working with a top notch lender that provided exactly what we needed was a great experience.”
About Mazuma: Mazuma Capital is committed to our client’s success. Our unique capabilities and innovative product offerings provide solutions accelerating financial growth. Servicing both rising companies and established businesses, Mazuma continues to secure its position as the middle-market industry leader. We build long-term relationships by delivering on our commitments. Mazuma co-authored the Utah Best Practices Alliance and subscribes to the ELFA Code of Fair Business Practices.

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Media Contact: Julie Fuchs, 801-816-0800 Ext. X291, jfuchs@mazumacapital.com, http://mazumacapital.com

FASB, IASB Revert to One Model for Lease Accounting

Never mind, the Financial Accounting Standards Board has decided on its plan to allow two different accounting methods for leases. They like their original, single-model idea best after all.
In deciding how companies should account for leases, the FASB and the International Accounting Standards Board initially proposed all leases would be treated like financing transactions, with companies recognizing a liability to make lease payments and putting an asset on the balance sheet reflecting the right to use the asset for the term of the lease. Both would be measured at the present value of the lease payments. The liability would be measured in subsequent periods using the effective interest method while the asset would be amortized or written down based on the pattern of consumption and the expected future economic benefit it would produce.
Companies swallowed the treatment for long-term lease agreements that look and feel a lot like the financed purchase of an asset, but they cried foul for short-term leases that look and feel more like simple rental agreements. FASB and IASB acquiesced and agreed they would work on a two-model approach.
The boards determined “finance leases” would be treated like installment purchases, much the way today's capital leases are booked in the financial statements. “Other than finance” leases would be treated like today's operating leases, with an even amount recognized as expense each period over the life of the lease. Such a recognition pattern would more closely match the actual cash flows as companies pay down their lease obligations, companies argued and the boards conceded. FASB and IASB instructed their staff to define the criteria that would be needed to distinguish between the two types of leases.
Now, however, the boards have reversed course and decided they won't establish a two-model approach. In a joint meeting last week, FASB and IASB said they're going to stick with their original idea as described in the exposure draft for a single model for all leases. They promised to give some further thought to how to address concerns about the presentation and disclosure of information related to amortization, interest expense on the liability to make lease payments, total lease expense, and lease payment cash flows.
The lease project is one of four key accounting standards FASB and IASB are developing jointly to try to bridge major differences between U.S. and international accounting rules. The board continue to mull over how they want map out the accounting requirements for lessors as well.

See entire article:  http://www.complianceweek.com/fasb-iasb-revert-to-one-model-for-lease-accounting/article/203665/

Revolvers Return, with Some Twists- Good news for credit-seekers as banks relax, a little.

If anything bodes well for the economy, this does: companies are opening up new revolving lines of credit and refinancing older instruments at reduced rates.

In 2010, lenders doubled their issuance of syndicated, revolving lines of credit, a staple of corporate finance, according to data from Thomson Reuters Loan Pricing Corp., with borrowings accelerating the second half of the year, to $381 billion.

During the financial crisis, banks cut their exposure to revolvers, downsizing instruments or flatly refusing to renew them. Now, individual banks are slowly raising the amount of untapped commercial-credit commitments they're willing to keep on their books, according to federal call reports.

As in the larger corporate-loan market, new issues are predominantly refinancings of debt set to mature in the next 12 months. In late February, for example, Avista Corp. replaced existing debt set to mature last April with a new $400 million facility that expires in 2015. Near the same time, FelCor Lodging Trust, an owner of 82 upscale hotels, closed on a $225 million instrument secured by 11 of its properties.

FelCor had terminated a line of credit in 2009 because covenants were getting tight, says Steve Schafer, FelCor's vice president of strategic planning. But once earnings rebounded, FelCor pursued a new revolver with a three-year maturity, a lower interest rate, and an option for a one-year extension to 2015.

"It's always good to push out maturities," says Schafer. "The lower interest rate [LIBOR plus 4.5%] improves our earnings, and a new [line] will help us manage liquidity better — we've been carrying excess cash because we didn't have a line of credit."

"With not as many strong credits, banks are eager to lend, and they are kind of bending some of the standards," says Richard M. Pollak, a practice group leader in lending and structured finance at Troutman Sanders LLP.

Companies with steady earnings can lengthen terms to five and, at the outside, seven years. "It's fairly typical of what we see entering a growth cycle," says Walter Owens, head of U.S. commercial banking at TD Bank. "But we're a bit surprised by some of the deals going out [five and seven years]. We've let some of these deals go because we didn't think the company deserved that type of facility."

Borrowers like being locked in. "They don't have to worry about waking up one morning and discovering that their lender is not so enamored of their business anymore," Pollak says.

So, could banks be under pricing risk again? While easing up on some loan conditions, banks are more disciplined at valuing the receivables, inventory, and real estate that secure lines of credit, says TD Bank's Owens. "Since loss and default rates were not as high as most banks anticipated, in the last six months banks have been more aggressive. But, from a historical perspective, they're still fairly conservative."

And companies are having to put up a lot of assets. For example, Delta Air Lines's new revolver is secured by accounts receivable, airport slots, ground-service equipment, spare parts, engines, and flight simulators, among other property. "Out of an abundance of caution, banks are taking a lot more collateral," says Pollak. So, while banks and institutional investors may be going long, they're definitely hedging their bets.

Accounting update from ELFA

May 23, 2011: At a joint meeting on May 19, the FASB and IASB reversed recent tentative decisions in the lease accounting project as follows:

• Lessee P&L - No leases will be allowed straight line rent expense treatment but rather all leases will have be front ended lease costs equal to interest expense and depreciation of the right of use lease asset
• Lease Term - Will not be current GAAP but rather will be a lower threshold including consideration of strategic importance of asset, lessee intent and behavior in renewing in the past and will be adjusted when there are changes in judgment or circumstances
• Incremental Borrowing Rate - Lessee will use its new incremental borrowing rate to calculate adjustments when lease payment assumptions change
• Short-Term Leases - Will not be exempt from capitalization
• Lessor Accounting - Still undecided between only using a derecognition method or having both an operating lease method and a derecognition method. They are considering accreting residuals in the derecognition method.

New Government Regulations Driving Healthcare's Demand for Equipment Financing

Have you ever stood in a doctor’s office and stared at the seemingly endless rows of color-coded file folders lining every spare inch of the office? It is a scene we are all familiar with because the healthcare profession still maintains vital medical records the old fashioned way – handwritten notes, stuffed in manila folders, and stored on shelves or in file cabinets.
The federal government is seeking to change this system by promoting wide-spread usage of electronic health records (EHR) and providing financial incentives so physicians, hospitals, clinics and other medical services facilities are able to implement EHR systems. New government regulations will automate and streamline the physician’s workflow to improve patient safety and the quality of patient care. This industry-wide transformation is driving demand for new equipment and system upgrades.
Despite leading the world in IT development for sectors such as banking, communications and transportation, the United States has lagged behind other industrialized nations in the race to adopt EHRs and modernize its healthcare system. Some of the world’s leading users of this technology include the Netherlands, where 98% of primary-care providers use EHR systems, New Zealand and Australia, with 92% and 89% use respectively, according to a 2009 Commonwealth Fund survey.
Recently, however, US adoption rates of EHRs have improved. At the 2011 Annual Conference for HIMSS, Health and Human Services Secretary Kathleen Sebelius highlighted increases in the use of EHRs by US patient care providers in what she called “a revolution in healthcare.” Secretary Sebelius cited 2008 figures that showed only 10% of hospitals, and just fewer than 20% of doctors, use basic EHRs. Over the last two years, according to Ms. Sebelius, the percent of doctors using electronic records has increased to almost 30, and four out of five hospitals say they are planning to apply for government incentive payments by 2015 that will require them to meet meaningful use standards in EHRs.
Paper-based medical records lead to inevitable inefficiencies, and possible life-threatening errors. The aim of the federal regulations is to reduce data entry errors, speed the sharing of patient information, and minimize the time spent on preparing charts in advance of appointments. In order for electronic medical records to be truly effective, all healthcare providers who have a meaningful impact on patient care – from generalists to specialists – must meet the “meaningful use” standards.
Overview of the “HITECH” Act
The American Recovery and Reinvestment Act of 2009 included $19 billion in funding for the Health Information Technology for Economic and Clinical Health (HITECH) Act, aimed at advancing the adoption of electronic health records. The HITECH Act provides incentive payments for healthcare providers who implement EHR systems and meet “meaningful use” requirements. Penalties for those who fail to comply with these requirements will begin in 2015. The tight timeframe for achieving meaningful use and receiving the financial benefits will drive significant demand.
The objective of the HITECH Act was to encourage the use of EHRs in a meaningful manner while improving the quality of care through the efficiencies the electronic exchange of healthcare information creates. The financial incentives provided under the HITECH Act come in the form of Medicare and Medicaid reimbursements.
Achieving Meaningful Use
To receive the financial incentives and avoid penalties, medical providers must demonstrate that they are using the equipment and software in a meaningful way. Simply purchasing new software and hardware will not qualify a provider for incentive payments. Healthcare providers must demonstrate their usage of the equipment in a meaningful way, as defined by the Centers for Medicare and Medicaid Services (CMS), thereby reducing the redundancy and cost of patient care.
Meaningful use will be implemented in three stages, with stage one covering 2011 and 2012. For full details on the HITECH Act and the meaningful use requirements please visit the CMS website at www.cms.gov or the Office of the National Coordinator for Healthcare Information Technology’s website at www.healthit.hhs.gov.
Once approved, healthcare providers will be eligible for $40,000 to $65,000 in incentive payments. Federally qualified health centers, rural health clinics, children’s hospitals and other healthcare facilities are also eligible for funding through CMS.
The incentive payments for providers will be phased out over time, and Medicare/Medicaid payments will be reduced for those who fail to adopt certified electronic health records. Those not meeting the meaningful use requirements will see the incentives turn to penalties if meaningful use is not met by 2015.
Factors Driving Investment
Compliance with the new regulations means medical providers will need to invest in new IT hardware, software, and services. Purchasing the necessary equipment could cost tens of thousands of dollars for a small practice and carry a significantly higher price tag for larger practices and healthcare facilities. This required investment comes at a time when the healthcare industry, like most US industries, faces significant budgetary constraints.
During the recession, healthcare providers deferred investments in equipment upgrades to protect their own financial well-being. To cope with the recessionary environment, medical providers have been forced to improve quality, reduce costs, and increase transparency. In these tight budgetary times, medical providers cannot afford noncompliance. The built-up demand created by those deferrals, accompanied with the government initiatives, will drive new equipment purchases and installations.
Providers are looking to preserve their cash reserves and credit facilities to deliver services, fund operations, and undertake projects that are not easily financed. Installing the technology early will help healthcare providers to demonstrate “meaningful use” in order to qualify for the federal stimulus incentives provided by the HITECH Act. Therefore, it is increasingly important for them to team-up with a knowledgeable financing partner to acquire and deploy the necessary hardware, software, and services to evolve their businesses to comply with the new regulations and satisfy the meaningful use requirements.
Healthcare Providers Have Multiple Financing Options
By acquiring the necessary equipment through a lease, healthcare providers get access to the cutting edge technology needed to deliver best-in-class patient care without bearing the full up-front cost of ownership. Term financing enables the lessee to match a long-term capital acquisition with a long-term finance solution.
Medical professionals need to partner with healthcare equipment manufacturers, software providers, and IT professionals to satisfy the meaningful use requirements. The acquisition and implementation of these systems present a significant growth opportunity for finance providers who understand the industry and regulatory framework, and who can provide financing solutions within the industry’s budgetary restraints.
In summary, as the healthcare industry continues to upgrade technology and equipment to comply with federal regulations, there is a growing demand for equipment financing solutions tailored to the healthcare industry. The good news is that healthcare providers are looking for knowledgeable financing partners that can work with them to provide best-in-class healthcare and qualify for federal stimulus incentives to offset the cost of deployment.

Source: World Leasing News/Leasing Finance Blogs