March 2019
Intermediate to advanced
1440 pages
51h 20m
English
Content preview from Wiley GAAP 2019
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57ASC 842 LEASES
PERSPECTIVE AND ISSUES
Technical Alert
ASU 2016-02—Putting It on the Balance Sheet
Note: See the Technical Alert in the chapter on ASC 250 for information on SEC pre-adoption disclosures for the new standard on leases, ASU 2016-02.
ASU 2016-02, Leases, created ASC 842 and is discussed throughout this chapter. Following are key points of the new guidance.
In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The existing standard (ASC 840) 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 new standard (ASC 842) 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.
Guidance
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 (right of use assets) and lease liabilities on the balance sheet,
- Lessors to align with certain changes in the lessee model and the new revenue recognition standards, and
- Lessees and lessors to disclose significant information about lease transactions.
Lessees
Under ASC 842, lessees recognize all leases, other than short-term leases, on the balance sheet. Lessees recognize ...
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