FASB Newsletter - October 2018

October 2018

Topic 842, Leases

Updated in 2018, BDO’s Leases Practice Aid provides broad resources and examples to assist lessees, lessors, and practitioners in complying with the leasing standard ASU 2016-021 (“Topic 842” or “the new standard”); issued by the Financial Accounting Standards Board (“FASB” or “the Board”) in 2016, taking effect beginning 2019. 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 BDO 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)