New Lease Accounting Standards Are Coming: Are You Ready?
After nearly a decade of planning and debate, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued new lease accounting standards in the first quarter of 2016. In general, the changes will take effect in 2019 for public companies and 2020 for private companies.
The new standards are designed to bring additional transparency to financial reporting by requiring organizations with leased assets to recognize the rights and obligations of those leases on the balance sheet. Since the reporting of operating leases is a rather substantial change from current GAAP principles, these changes will require modifications to your organization’s financial reporting.
While the document outlining the details of these FASB lease changes is quite long and thorough, the most impactful changes are regarding lease classification and financial reporting:
The new standards will require both capital leases and operating leases to be recognized on the balance sheet. Now is the time to identify all multi-year leases and make sure your company has a system in place to track operating leases and any modifications that need to be made prior to the effective date.
Be prepared to handle re-measurement and re-assessment scenarios, as well as transition period restatement transactions and financial system reporting.
For those with international filing responsibilities, the IASB has issued similar updates as outlined in IFRS 16. Like the FASB changes, the IASB updates will also require lease reporting on the balance sheet; however, the IASB treats all leases as finance type leases instead of making a distinction between operating and finance. Read more at www.IFRS.org.
How MRI Can Help
The recent FASB and IASB lease accounting updates highlight the importance of utilizing flexible software that can adapt to support proposed changes. By
integrating financials with CRE management tools such as MRI Corporate Real Estate (CRE) Management, organizations are empowered to streamline compliance processes and analyze the impact of these changes.
Furthermore, companies that leverage business intelligence and analytics software, such as the MRI AnalytiX Portal, will be well positioned to model new scenarios quickly and make informed decisions that impact the future of the business.
Finally, MRI Software will continue to collaborate with industry experts and accounting professionals to ensure that our software enables our clients to adopt these new standards.
Learn more about the new lease accounting standards and the impact on your business.
Why Did the FASB Issue a New Standard on Leases?
The FASB provides insight into problems with the current lease accounting model and explains how the new regulations came into being. To learn more, please visit: FASB.org
FASB’s New Standard Brings Most Leases Onto the Balance Sheet
Deloitte has compiled an insightful, actionable report that includes an interpretation of the new standards, highlights of key changes, and guidelines for determining lease classification. To view the full pdf, visit: “FASB’s New Standard Brings Most Leases Onto the Balance Sheet”
The Impact of FASB on Leases
Get more details on the new accounting standards updates and how they specifically apply to leases. To learn more, visit: FASB.org
IASB Effects Analysis
For IASB filers, the IFRS has outlined the potential costs and benefits of the new standards in the Effects Analysis. To view the full pdf, visit: January 2016 – IFRS Effects Analysis
AICPA New Leases Accounting Standard—Learning and Implementation Plan
The AICPA has created an action plan that offers guidance on how to interpret and apply the new accounting standards update to your organization. To view the full pdf, visit: “New Leases Accounting Standard – Learning and Implementation Plan”