New Lease Accounting Proposal
The Financial Accounting Standards Board (FASB) is finalizing a new accounting standard update that will greatly change the way lessees and lessors account for leases under generally accepted accounting principles. The new lease accounting will require that CPAs and other accounting professionals re-learn the fundamentals of accounting for leases, including recognition, measurement, presentation and disclosure.
Some highlights of the proposal:
- Eliminates the current operating lease model and replaces it with a right-of-use model which
- Requires the lessee to record an asset that represents the lessee’s right to use the underlying asset and a liability for the lessee’s obligation to make payments to the lessor.
- Initial recognition of the liability is measured as the discounted present value of the lease payments over the lease term.
- Initial recognition of the right-of-use asset includes the initial carrying amount of the lease liability plus any initial indirect direct costs incurred by the lessee.
- Subsequent to the date of commencement of a lease, the lessee measures its right-of-use asset at amortized cost, amortizing the asset on a systematic basis and the liability is reduced as payments on the lease are made.
On November 21st at 12:00pm, the professionals of EisnerAmper will be presenting a one-hour webinar on this topic titled “Overview of Proposed Accounting for Lease Standards from FASB.”