In 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases. This new lease accounting standard (ASC 842) significantly impacts how private and public businesses across all industry sectors manage, account for, and report substantially all leases, including equipment and real estate. Because of the meaningful accounting changes involved, businesses must begin preparing now to comply with the new standards.
Will your organization be affected? Read more to find out how a trusted partner can offer integrated expertise in the range of areas impacted by the adoption of the new lease accounting standards and post-compliance optimization.
What Is The New Lease Accounting Standard?
ASC 842 requires organizations who lease assets— referred to as “lessees”—to recognize, on their balance sheet, the assets, and liabilities for the rights and obligations created by those leases with terms greater than one year. Specifically, ASC 842 impacts:
- New processes
- Upgrading technology
- More detailed reporting requirements
- Technical accounting assessments
When Is The New Lease Accounting Standard Effective?
For public entities, the new lease accounting standard went into effect for the annual period beginning after December 15, 2018, and the calendar year 2019.
In June 2020, the Financial Standards Board (FASB) voted to delay ASC 842 for privately held companies due to the COVID-19 pandemic. With the deferral, private companies are now required to adopt for annual financial reporting periods beginning after December 15, 2021, which is 2022 for calendar year-end companies. Early adoption is permitted.
Defining A Lease
How Can I Prepare For Implementation Of The Lease Accounting Standard?