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. ...

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