Industry Insights

FASB Offers Relief to Ease Implementation of New Leases Standard

April 2015

A change in accounting guidance for leasing activities is imminent—the Financial Accounting Standards Board (FASB) has substantially completed redeliberations on its 2013 proposal on lease accounting and is preparing to issue a final leases standard before the end of 2015. The most pressing question now posed by lessors and lessees:  Will my organization need to review all contractual and lease agreements before the implementation date?

Transitioning may not be as burdensome as first thought, as FASB has tentatively settled on a dual approach for lessees based on lease classification determined using criteria similar to those in place today. In general, lessees will continue to evaluate whether a lease is effectively an installment purchase. If not, the lease would be accounted for similarly to today’s operating leases, except the lease asset and liability will be recognized on the balance sheet. Similar to lessees, lessors will continue to evaluate leases based on whether the lease is effectively a financing or a sale, with remaining leases treated similarly to today’s operating leases.

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