Accounting for Leases under the Forthcoming Exposure Draft

Will Businesses Welcome the Guidance?

Kevin M. Lightner, PhD, and Bill Bosco, CPA, and David G. DeBoskey, PhD, CPA, and Sharon M. Lightner, PhD

The old accounting rules for leasing will soon be resigned to history. Gone will be the “bright line” tests of the rules-based accounting standard that called for meeting one or more of four criteria to distinguish whether a leased asset should or should not appear on the balance sheet. The new accounting rules will come a long way in improving one of U.S. GAAP's most often cited criticisms—that it includes too many arbitrary “bright lines” in the guidance. The old rules will be replaced by a model where all long-term leases appear on the balance sheet, while businesses can elect whether short-term leases will appear on the balance sheet.