KPMG Executive View | December 2021

 

Insight

ASC 842 for equipment lessees

Updated: An executive level overview of the new lease accounting standard for equipment lessees.

Our executive summary highlights key accounting changes and organizational impacts for lessees applying ASC 842.

Applicability

  • Lessees in the scope of ASC 842

Relevant dates

Effective date Public entities and certain other entities* Public NFPs** All other entities

Annual periods – Fiscal years beginning after                                                                                       

Dec 15, 2018

Dec 15, 2019

Dec 15, 2021

Interim periods – In fiscal years beginning after     

Dec 15, 2018

Dec 15, 2019

Dec 15, 2022

Early adoption allowed in fiscal years beginning after

N/A

Yes

Yes

* Includes (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 (‘Public NFPs’); and (3) employee benefit plans that file financial statements with the SEC.

** That had not issued GAAP-compliant financial statements reflecting the adoption of ASC 842 before June 3, 2020.

 

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

Report contents

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

Related content

Handbook: Leases

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