An Overview of the New Accounting Model for Leases
Leasing is an important source of financing for many entities in the United States and around the globe. Many entities enter into leasing arrangements to gain access to assets, obtain financing, or reduce exposure to the risks of ownership of an asset. Yet the current accounting model for leases, laid out in Topic 840, Leases, does not require lessees to recognize assets and liabilities arising from operating leases.
Financial statement users have expressed concern about the current lease accounting model as it does not reflect the true economic substance of an operating lease transaction. As a result, the FASB restructured the existing lease accounting guidance for both lessees and lessors under US GAAP. This complimentary special report provides an overview of the new guidance on leases.