There’s been a lot of chatter throughout the profession about the International Accounting Standards Board’s new lease accounting rule.
Released on Jan. 12, the long-awaited standard will require companies to report all leases on their balance sheets as assets and liabilities. According to Accountancy Age, that will put about $3 trillion in leases onto company balance sheets.
On this side of the pond, officials with the the U.S.-based Financial Accounting Standards told MACPA contributor Edith Orenstein that the FASB’s version of the lease standard is complete and in production and is expected to be published in February.
The two versions will differ slightly. Here’s how the Journal of Accountancy explained the differences:
Both boards agreed to substantially carry forward the existing accounting requirements for lessors. But for lessees, the IASB decided on a single model for all lease recognition, while FASB has decided on a dual model.
Under FASB’s model, lessees will account for most existing capital leases as finance leases (recognizing amortization of the right-of-use asset separately from interest on the lease liability), while most existing operating leases will be accounted for by lessees as operating leases (recognizing a single total lease expense).
The IASB’s model requires lessees to account for all leases as finance leases, with amortization of the right-of-use asset recognized separately from interest on the lease liability.
CFO.com’s David Katz reports that many U.S.-based multinational organizations might be required to keep two sets of books to detail their leasing arrangements.
Meanwhile, the FASB itself is offering some early clues about what to expect from its version of the lease standard. The board has released an article that details what lessees will need to know about the new standard and how financial report preparers should prepare for the transition. Read the article in its entirety here.
Stay tuned: The FASB’s model is coming next month.
Want to learn more?
Get a comprehensive update of what’s happening around the profession with the MACPA’s “ACA and Professionals Issues Update,” scheduled for 8:30 a.m. to noon on Wednesday at Kelly headquarters in Sparks, Md. MACPA CEO Tom Hood, CPA, will open with an hour on the latest issues affecting the CPA profession and how to stay future-ready in a changing and complex world. The remaining three hours will feature Sandy Walters, chief industry information officer for Kelly Benefits, who will cover an overview of ACA with emphasis on tax consequences. Get details and register here.