Accounting for Leases

On February 25, 2016, FASB released Accounting Standards Update No. 2016-02, Leases (Topic 842). It will require that lessees record nearly all leases on the balance sheet. Lessors will see some changes too, largely made to align with the revised lessee model and the FASB's new revenue recognition guidance.

On July 30, 2018, FASB issued ASU 2018-11 Leases (Topic 842) – Targeted Improvements  that reduces costs and eases implementation of the leases standard for financial statement preparers. The ASU simplifies transition requirements and, for lessors, provides a practical expedient for the separation of non-lease components from lease components.

Background

Leased AirplaneOn November 11, 2015, the FASB voted to proceed with finalizing a new lease accounting standard. The final Accounting Standards Update (ASU) was published in February 2016. The standard has the potential to affect every entity’s financial reporting. The core principle of the new leases standard is that lessees should recognize assets and liabilities arising from all leases, except for leases with a lease term of 12 months or less. This will significantly gross-up many entities balance sheets. Public entities are required to adopt the new leases standard for reporting periods beginning after December 15, 2018. Nonpublic entities have an extra year to adopt. Early adoption is permitted.

AICPA TV

Fred Gill, Senior Technical Manager - Accounting Standards Team, discusses the new FASB Leases standard and its wide implications.

More on AICPA TV

IASB Leases Standard

Leased EquipmentOn January 12, 2016, the International Accounting Standards Board issued its much-anticipated leases standard, IFRS 16. The standard will require all leases to be reported on a company’s balance sheets as assets and liabilities.

IFRS 16 began as a convergence project with the FASB. However, the boards were unable to reach consensus on some key issues, and some significant differences between IFRS 16 and the new FASB standard remain. For more information about the IFRS 16, see the IASB’s webpage at iasb.org.

AICPA Webcasts and CPE Courses

Leases: Mastering the New FASB Requirements (LEAS)

The Bottom Line on the New Lease Accounting Requirements (CL4LEAS)

IFRS 16 – Leases

PCPS Lease Toolkit – COMING SEPTEMBER 2018