FASB Newsletter - July 2016

July 2016

Topic 842, Leases

In early February 2016, the Financial Accounting Standards Board (“FASB” or “the Board”) issued its highly-anticipated leasing standard in ASU 2016-021 (“Topic 842” or “the new standard”) for both lessees and lessors. Under its core principle, a lessee will recognize right-of-use (“ROU”) assets and related lease liabilities on the balance sheet for all arrangements with terms longer than 12 months. The pattern of expense recognition in the income statement will depend on a lease’s classification.

Lessor accounting remains largely consistent with previous U.S. GAAP, but has been updated for consistency with the new lessee accounting model and with the new revenue standard, ASU 2014-09.2
 
For calendar-year public business entities the new standard takes effect in 2019, and interim periods within that year; for all other calendar-year entities it takes effect in 2020, and interim periods in 2021. 

This publication summarizes the new leasing guidance, including practical examples to assist practitioners. It also includes our observations on key concepts, as well as insights into how certain aspects of the new standard compare with prior U.S. GAAP.

[1] Leases (Topic 842)
[2] Revenue from Contracts with Customers (Topic 606)