Wiley GAAP 2018, 16th Edition

59ASC 842 Leases

1. FASB Issues New Standard for Lease Accounting
   1. Technical Alert
   2. Overview—Putting It on the Balance Sheet
      1. Lessors
      2. Lessees
   3. Scope
   4. Effective Dates
   5. Key Terms in the Standard
   6. Transition
      1. Practical expedients
      2. Significant changes from current U.S. GAAP
   7. Implementation Considerations

FASB Issues New Standard for Lease Accounting

Technical Alert

See the Technical Alert in the chapter on ASC 250 for information on SEC pre-adoption disclosures for this new standard.

Overview—Putting It on the Balance Sheet

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The existing standard has been criticized because its bright-line classification criteria enabled entities to structure leases in such a way as to avoid putting them on the balance sheet. The standard aims to improve and simplify the financial reporting for leases and create a model that provides for faithful representation of leasing transactions for both lessees and lessors.

The objective of the standard is to improve information for financial statement users by increasing transparency and comparability among organizations. To accomplish this, the standard requires

• Lessees to recognize lease assets and lease liabilities on the balance sheet
• Lessees and lessors to disclose significant information about lease transactions.

Lessors

The lessor accounting model is substantially unchanged. However, lessors will have to review their systems and processes to ensure that data ...