Want to save this page for later?


The Daily

FASB Approves Lease Standard

Chris Gaetano
Published Date:
Nov 12, 2015
ChangesAheadSquareThe Financial Accounting Standards Board (FASB) voted in its Wednesday meeting to approve the final lease standard and proceed with publication, which is estimated to arrive early next year. Under the new standard, leases will appear on the balance sheet as both a "right to use" asset and as a lease payment liability. How this will be calculated will depend on whether it is a Type A lease, which includes most non-property type leases, or a Type B, which includes mostly real estate leases, a contrast with the International Accounting Standards Board's version which uses only a single lease model. 

“We believe that this new standard is important because it will provide investors, lenders and other users of financial statements a more accurate picture of the long-term financial obligations of the companies to which they provide capital,” said FASB Chairman Russell G. Golden.

The new standard is the culmination of a nearly decade-long effort that saw two different exposure drafts being released, one in 2010 and the other in 2013. The Society comment on the drafts in both years. In response to the 2010 draft, the Society said it felt the idea was a good one in principle, but the specifics were marred by complicating details such as accounting for the amortization of a leased asset. In response to the 2013 draft, the Society generally agreed with the proposal but objected to the different expensing treatments between Type A and Type B leases, saying they should be treated the same way, as well as how the standard would treat variable lease payments. 

The upcoming standard will be effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018; for private companies, the standard will be effective for annual periods beginning after December 15, 2019. Early adoption will be permitted for all companies and organizations upon issuance of the standard.