KPMG Executive View  |   September 2018
 

Topic 842: Equipment lessees

Filed under: Leases

KPMG’s executive summary highlights key points for equipment lessees applying the new leases standard. In addition to the accounting changes, there are organizational impacts that will need to be addressed.

Applicability

ASC 842 (ASU 2016-02, ASU 2018-01, ASU 2018-10, ASU 2018-11)

  • All companies in the scope of ASC 842

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:

Public business and certain
other 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

* (1) public business entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market; and (3) employee benefit plans that file financial statements with the SEC.

 

Key impacts

  • Lessees will recognize all leases, including operating leases, with a term greater than 12 months on-balance sheet
  • Key balance sheet measures and ratios may change, IT systems may need to be upgraded or modified, and accounting processes and/or internal controls will need to be revised
  • Lessees can choose between two transition methods, with additional practical expedients available
  • Sale-leaseback accounting is substantially changed
  • Both qualitative and quantitative disclosures are expanded

Webcast

Listen to KPMG’s webcast: Implementing the new leases standard (ASC 842) - where do we stand?

Report contents

  • In a snapshot
  • Effective dates
  • The transition approach
  • Leases on-balance sheet
  • Other key considerations

Related Content

KPMG’s Handbook: Leases

Effective date:

Annual periods – Fiscal years beginning after

Interim periods – In fiscal years beginning after

Public business*

Dec. 15, 2018

Dec. 15, 2018

All other entities

Dec. 15, 2019

Dec. 15, 2020

Early adoption allowed? Immediately

* (1) Public business and certain other entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market; and (3) employee benefit plans that file financial statements with the SEC.

Key impacts

  • Example risks and controls based on a hypothetical lease accounting process for a lessee
  • Most useful in combination with KPMG’s ICFR Reference Guide, which incorporates elements of the COSO 2013 Framework

Report Contents

Note **

If the interactive PDF does not work on your web browser, please download the print-ready version.

 

 

Receive timely updates on accounting and financial reporting topics.