What is the change?
ASU No. 2016-02, Leases (Topic 842), changes the financial reporting obligations of companies that enter into leasing transactions for assets such as real estate, vehicles and equipment. It will significantly affect your organization if you have arrangements that need to be accounted for under the new standard.
- Financial statements will be affected with lease related assets and liabilities coming on to the balance sheet
- Agreements beyond traditional leases may need to be accounted for under the new standard
- Financial arrangements such as debt covenants may be negatively affected
- Additional financial statement disclosures will be needed
- Internal training, policies and procedures and new internal controls regarding application of the standard will be needed for finance departments and financial statement users
- Companies with large numbers of leases to manage may need to implement software solutions, as well as processes and internal controls over those systems