Changes to Lease Accounting Have Been Announced. Are You Ready?
Regardless of the type of business that you are in, there is a good chance that you have been involved in a lease transaction. Whether you have rented space in an office building or leased vehicles or manufacturing equipment, you have most likely been exposed to lease accounting in one way or another.
While you may not have been required to recognize these leases on your company’s balance sheets in the past, with the Financial Accounting Standards Board’s new leases standard, the accounting is about to change. In addition, you will want to pay close attention as the new standard applies to all type of entities— including public, private and not-for-profit organizations.
Under the new standard, lessees are required to recognize assets and liabilities arising from all leases, except for agreements that have a lease term of 12 months or less. Generally, lessor accounting will be similar to current GAAP; however, both lessor and lessee disclosures will change.
Public entities will be required to adopt the new Leases standard for reporting periods beginning after Dec. 15, 2018 while; nonpublic entities will have an extra year to adopt. Early adoption is permitted.
For more information on the new standard and the AICPA’s planned implementation resources, watch this brief video.
Our Financial Reporting Center leases webpage contains up-to-date information on the new leases standard. Please check back often, as we will be adding valuable resources frequently.
Fred Gill, Senior Technical Manager- Accounting Standards, American Institute of CPAs.
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