The Wait is Over: FASB Issues New Guidance on Lease Accounting
By: Jason Bramwell Staff Writer - AccountingWEB
The Financial Accounting Standards Board (FASB) officially released its long-awaited lease accounting standard on Feb. 25, which now requires companies to report most leases on their balance sheets and puts an end to the off-balance-sheet reporting of assets and liabilities related to the rights and obligations created by operating leases.
While companies are currently required to disclose lease commitments in the footnotes of their financial statements, they will now have to add lease obligations to their books instead.
“The new guidance responds to requests from investors and other financial statement users for a more faithful representation of an organization’s leasing activities,” FASB Chairman Russell Golden said in a written statement. “It ends what the US Securities and Exchange Commission and other stakeholders have identified as one of the largest forms of off-balance-sheet accounting, while requiring more disclosures related to leasing transactions.
“The guidance also reflects the input we received during our extensive outreach with preparers, auditors, and other practitioners, whose feedback was instrumental in helping us develop a cost-effective, operational standard,” he added.
The new standard affects all companies and organizations that lease assets, like real estate, airplanes, and manufacturing equipment. According to a recent study by equipment leasing software provider LeaseAccelerator, public companies that will likely be impacted the most by the lease accounting overhaul include Walgreen Co., AT&T Inc., McDonald’s Corp., and Delta Air Lines Inc.
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The Equipment Leasing and Finance Association has also provided the following guides to help you prepare for the new rules:
