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Understanding the Accounting Standards Update (ASU) 2016-02 “Leases”

The new ASU, applicable to publicly held companies as of December 15, 2018 and all entities for fiscal years beginning December 15, 2019, requires leases to be recorded. This is a change to the prior Accounting for Operating Leases which only required footnote disclosure.

  • All leases with terms 12 months or longer must be accounted on the Balance Sheet
  • Both finance and operating leases must be recorded
  • Assets recorded represent right to use leased asset
  • Recorded liability represents obligation of lease

Who is affected? Any entity that enters into a lease.

If you have a lease, or are considering a lease, be aware of this accounting change. Speak with your accounting consultant about the change to understand its impact.

Read more about the new standard from the Financial Accounting Standards Board here.

 

This article is a short description of the new lease accounting rules and is not necessarily representative of all situations involving leases and only includes the accounting for lessees. Your specific transaction or matter should be discussed with your accounting consultant.