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FASB issues ASU on leases

  • FASB document Image

Feb 25, 2016

The FASB has issued its new leases standard, ASU 2016-02.

The ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers. The new leases standard represents a wholesale change to lease accounting and will most likely result in significant implementation challenges during the transition period and beyond.

The new guidance will be effective for public business entities 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 ASU will 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 will be permitted for all entities.

The leases project was part of a convergence effort between the IASB and FASB; however, the IASB’s counterpart standard, IFRS 16, contains notable differences from ASU 2016-02. For instance, the IASB’s standard has a single lessee accounting model while the FASB’s has a dual lessee accounting model. However, both standards require that assets and liabilities be recognized (with limited exceptions).

For more information, see Deloitte's related Heads Up newsletter as well as the press release, FASB in Focus newsletter, ASU, cost-benefit analysis, and video discussion by FASB Vice-Chairman Jim Kroeker and Board members Tom Linsmeier and Hal Schroeder on the FASB’s Web site.

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