Important Lease Accounting Standards Update

Important Lease Accounting Standards Update

On Wednesday, November 11
th 2015, the Financial Accounting Standards Board (FASB) announced that they plan to issue the final version of the highly anticipated lease accounting standards in early 2016.

The effective dates will be calendar years 2019 and 2020 for public and non-public entities, respectively. This is another step by the FASB towards reaching a convergence with international accounting standards. The substance of this standard is that entities will have to record right of use assets on their balance sheets with corresponding liabilities for most lease obligations. Currently, future obligations under operating leases do not appear on balance sheets, but only in notes to financial statements. It is notable to those who prepare GAAP basis financial statements that loan covenants can be significantly affected by this change. This is a crucial matter for those entering into a substantial lease agreement in the future. Be proactive in consulting your accountant regarding the potential impact on your financial statements and loan covenants.

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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