New Rules in 2019 Change Data Center Lease Definition

New FASB/IASB rules that go into effect in 2019 require leased assets to be capitalized on the balance sheet instead of recorded as operating expenses.Previously, data center leases could be listed as an operating expense, rather than as capital expenditure on balance sheets, allowing systems integrators to operate ‘asset light’ models, where data center capacity was completely outsourced. New FASB/IASB rules that go into effect in 2019 require leased assets to be capitalized on the balance sheet instead of recorded as operating expenses.

In the new definition of a lease, an identified asset, plus the right to control that asset, constitutes a lease that must be recorded on the balance sheet. Therefore, organizations looking to avoid recording unused assets on their balance sheets need to optimize utilization and eliminate overprovisioning.

The accelerating success of cloud computing models has left organizations that must keep certain workloads on-premises with antiquated and wasteful processes – capacity planning, demand forecasting, and expensive and painstaking capex outlays for equipment whose value depreciates while it remains unused.

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