Defining Issues | February 2016
FASB balloons balance sheet with new lease accounting standard
KPMG reports on ASC 842, which ends off-balance sheet lease treatment. The new leases standard may substantially increase reported assets and liabilities in accounting for leases across all industries.
Applicability
- Company that is a lessee
- Company that is a lessor
Effective dates
Mandatory effective dates and early adoption provisions:
Effective date: |
Public business entities |
All other entities |
| Annual periods – Fiscal years beginning after | Dec. 15, 2018 |
Dec. 15, 2019 |
Interim periods – In fiscal years beginning after |
Dec. 15, 2018 |
Dec. 15, 2020 |
Early adoption allowed? |
Immediately |
|
Key impacts
- Lessees will recognize most leases on-balance sheet
- New judgments are required to identify a lease
- Lessee reassessments will require new processes and controls
- Collectibility considerations and variable payments will affect lessors’ accounting in new ways
- Fewer lease origination costs will be capitalizable by companies
- Expanded quantitative and qualitative disclosures
- Significant changes to sale-leaseback accounting will affect seller-lessees and buyer-lessors
- Current build-to-suit lease guidance replaced
Report contents
- Key impacts to lease accounting
- Key differences between the new lease accounting standard and current US GAAP