This new lease accounting standard was issued right around the same time the new revenue recognition standard was issued; it is another accounting change that will demand a tremendous amount of effort from companies to implement both standards within a relatively short period of time of each other.
You said, another standard for leases – what’s the big deal? Here is why you should care.
- Current GAAP provides bright line guidance around leases whereas the new lease standard moves to a more principle based approach and requires companies to make certain judgments that they haven’t previously made before. This is going to change how companies think about their leases, processes and controls.
- Since the new lease accounting standard calls for virtually all leases to go on the balance sheet, there is going to be an increased need for data, as supposed to the current standard where only lease commitments are required to be disclosed. This accounting change will prompt companies to evaluate their processes in order to ensure that they have identified all relevant data they will need to put the leases on the balance sheet.
- The new lease accounting standard is effective for calendar year 2019. For public and closely-held companies that present comparative financial statements, the standard should be applied to the earliest period presented.
Lease accounting standard – it’ll be here before you know it! We can help take the stress off your team by evaluating your current processes and helping you gather the data and implementing the standard with plenty of time to spare. Contact us at:
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