Lease Accounting Support
Owners of Managed by Marriott Hotels | In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases (ASC 842), which becomes effective for most companies on January 1, 2019. The new standard supersedes all lease guidance under the existing United States’ generally accepted accounting principles.
Under the new standard, a lessee will recognize on its balance sheet a lease liability and a right-of-use asset for most leases, including operating leases. The new standard will also distinguish leases as either finance leases (the equivalent of capital leases today) or operating leases. This distinction will affect how leases are measured and presented in the income statement and statement of cash flows. ASC 842 does not make fundamental changes to today’s lessor accounting model.
As part of the implementation of the new accounting standard, Marriott International will provide lease accounting support to ensure compliance with the new standard for all operating lease contracts executed and managed by Marriott on behalf of the hotel owners under our management agreements. The lease accounting support is contingent upon hotel owners providing their incremental borrowing rate (discount rate) in order for Marriott to calculate the right-of-use assets and related liabilities.
The discount rate should be based on information available at the implementation date of January 1, 2019. In order to assess the impact of this standard in a timely manner, Marriott will begin requesting the discount rate in September 2018. Marriott Select Brand hotels will need to receive the information back by October 31, 2018 and Marriott Full Service hotels by December 15, 2018. At year-end, if there is any significant change in owner’s applicable discount rate, the owner must provide an update to their finance contact to ensure the most appropriate rate is utilized in lease calculations.
Marriott’s approach/key assumptions in accounting for leases and the key lease accounting activities are outlined here (EID and password required). Should you have any questions on the approach and/or owner requirements please contact:
For Full Service Managed Hotels:
Kevin Aylward
Vice President- Finance, Americas
Email: kevin.aylward@marriott.com
For Select Brand Managed Hotels:
Contract Compliance Team
Marriott Select Brands (MSB), Americas
Email: MSB.Americas.ContractCompliance@marriott.com
Thank you for your prompt attention to this request.