FASB to issue its final standard on leases

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Nov 11, 2015

On November 11, 2015, the Financial Accounting Standards Board (FASB) finished its redeliberations related to its upcoming standards on leases. Further, the Board directed the staff to proceed with drafting the final Accounting Standards Update for a vote by written ballot.

The FASB decided on a dual approach for lessee accounting, with lease classification determined in accordance with the principle in existing lease requirements (that is, determining whether a lease is effectively an installment purchase by the lessee). Under this approach, a lessee would account for most existing capital leases as Type A leases and most existing operating leases as Type B leases.

The International Accounting Standards Board decided that all leases should be accounted for by lessees as Type A leases (i.e., effectively every lease would be reflected as an installment purchase).

For public business entities (PBEs), the new leases standard would be effective for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein. For all other entities, the standard would be effective for annual periods beginning after December 15, 2019 (i.e., calendar periods beginning on January 1, 2020), and interim periods thereafter. Early adoption would be permitted for all entities. Further, an entity’s ability to early adopt the leases standard would not be linked to its adoption of any of the FASB’s other standards.

For more information, see the press release and tentative Board decisions on the FASB’s website.

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