After many discussions and evolving debates, the lease accounting standards project is nearing completion. Though the final draft won’t result in a single global accounting model as originally intended, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) agree that equipment leases need to be added to the balance sheet, but they differ on a lessee model.
The IASB model will allow for operating leases to be expensed on a front-loaded basis and then split between interest and amortization. Under the FASB model, operating leases will remain a straight-line expense presented as a single expense.
As it stands now, the new standards will become effective for public companies for fiscal years beginning after December 15, 2018, and for private companies effective annually beginning after December 15, 2019. Companies will have the option to implement these standards early once the final standards are published.
If you’d like to learn more about these new standards (in much greater detail), the ELFA has written an informative white paper addressing these key areas:
- Understanding what’s in the new lease accounting rules
- How to educate your sales teams, vendor partners and end-users about the rules
- How to dispel customer fears about the impending changes