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ARTICLE · 15 MARCH 2016

FASB Issues New Lease Accounting Standard

Grant Thornton LLP
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On February 25, the FASB released ASU 2016-02, Leases, completing its project to overhaul lease accounting. The ASU codifies ASC 842, Leases, which will replace the guidance in ASC 840.

United StatesAccounting and Audit
Grant Thornton'S Accounting Principles Group
Grant Thornton'S Accounting Principles Group
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Long-awaited guidance brings most leases on balance sheet for lessees.

Overview

On February 25, the FASB released ASU 2016-02, Leases, completing its project to overhaul lease accounting. The ASU codifies ASC 842, Leases, which will replace the guidance in ASC 840. The new guidance is effective for public business entities in fiscal years beginning after December 15, 2018. The effective date for most other entities is deferred for one year, meaning that most calendar-year private companies will be required to adopt the new standard in 2020. Early adoption is permitted for all entities.

Entities should be aware of the following key points about the new FASB standard:

  • Lessees will be required to recognize most leases "on balance sheet."

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