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 take effect in 2019 for public companies and 2021 for private companies and non-profits.
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. This applies to land, buildings, assets and equipment where the lease is over a year in length. Purpose-built software will pave the way for organizations to ensure departmental collaboration and compliance for ASC 842.