Lease Accounting - PwC
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Lease accounting
The FASB’s new lease accounting standard, ASU 2016-02, Leases (Topic 842), was
issued on February 25, 2016. The new leasing standard presents dramatic changes
to the balance sheets of lessees. Lessor accounting is updated to align with certain
changes in the lessee model and the new revenue recognition standard.
Our lease accounting page is your resource for implementing the new leasing
guidance. Here you will find helpful information and insights on the new lease
accounting rules including executive level insights through our In the loop series,
and a deeper dive into the leasing standard’s overall requirements with our In
depth publication. Now available: a comprehensive accounting and reporting guide
on lease accounting to help you with your company’s implementation. Also
available, industry focused In depth supplements. Visit pwc.com/us/leasing for
details on how PwC can assist with your approach to the new standard.
Getting your arms around the new leases standard?
Listen to our podcast to learn what lessees and lessors need to know on day one.
Download episode
See all episodes
Featured
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9/11/2017
Lease Accounting - PwC
Lease accounting
implementation issues
See our answers to some frequently raised
questions to assist companies as they
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Leases
The leasing standard - A
GAAP leases guidance.
new model and its impact
PwC's comprehensive guide to the new US
comprehensive look at the
The FASB has issued its new lease
transition to the new leases standard.
accounting standard, which will impact almost
all entities, particularly lessees.
View more insights on lease accounting
Key developments in lease accounting
• The FASB issued ASC 842, Leases, on February 25, 2016, and
the IASB issued IFRS 16, Leases, on January 13, 2016.
• Both standards require lessees to reflect virtually all leases on
their balance sheet. However, the boards differed in their
approach to the lessee income recognition model. The IASB’s
approach presents virtually all leases (other than short term leases
or “small ticket” leases) in a manner similar to today’s financing
leases. Under that approach, the lessee's expense would be front
loaded. The FASB retained a dual model that includes financing
leases, which are similar to today’s capital leases, and operating
leases, with expense recognized on a straight-line basis. Under
the FASB's dual approach, determining whether a lease is a
finance or operating lease will be based on guidance similar to the
classification model under current US GAAP, but without the bright
lines.
• The boards are more closely aligned on the lessor model, which is
• The FASB’s standard is effective for public companies, certain
not-for-profits, and benefit plans for interim and annual reporting
periods beginning after December 15, 2018 (private companies
have an additional year). Entities are required to adopt the
standard using a modified retrospective transition approach, which
requires application of the new guidance at the beginning of the
earliest comparative period presented in the year of adoption.
Early adoption is permitted.
• The IASB’s standard is effective for annual reporting periods
beginning on or after January 1, 2019. The IASB permits
retrospective or a simplified retrospective transition, which does
not require a restatement of comparatives and includes certain
reliefs related to the measurement of the right-of-use asset and
the lease liability. Early adoption is permitted only concurrent with
adoption of the new revenue standard.
substantially equivalent to current US GAAP and IFRS. Certain
changes were required to conform lessor accounting to the
recently issued revenue recognition guidance. However, the
boards differ in some areas, such as how to identify when the
lessor has sold an asset via the lease arrangement. The IASB’s
focus is on the transfer of risks and rewards, which is consistent
with the principle in its current guidance. The FASB’s approach is
based on control of the asset, which is similar to the model in the
new revenue standard. This means a sale can only occur when
control of the asset has transferred. If control has not transferred,
an arrangement otherwise qualifying as a finance lease would be
accounted for as a direct financing lease (i.e., the underlying asset
would be derecognized, but upfront profit would not be
recognized).
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9/11/2017
Lease Accounting - PwC
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Why it's important
• The current lease accounting guidance has been criticized for
allowing leased assets and, perhaps more importantly, the
obligations for future lease payments to be excluded from the
balance sheet, and for using “bright line” thresholds that can lead
to significantly different accounting for economically similar
transactions. The project was originally expected to result in a
standard that provided generally consistent accounting for leases
on a global basis; however, this will not be fully achieved.
• The guidance significantly changes lessee accounting for leases
and impacts financial statement presentation and financial metrics,
including many that relate directly to debt covenants, key
performance indicators, and perhaps compensation
arrangements.
• Management should begin thinking about how the new rules may
affect existing leases as well as considering those potential
implications for contemplated new agreements. In addition, they
need to communicate with banks, rating agencies, and financial
analysts about how the company’s financial picture may be
affected.
Our insights on lease accounting
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PwC responds
to PCAOB's
proposal
related to
auditing
accounting
estimates
08/23/17
07/21/17
07/19/17
07/21/17
Our guide describes in
detail the financial
statement presentation
and disclosure
The EITF deliberated on
accounting for
implementation costs in a
PwC supports PCAOB's
proposal to update
requirements for auditing
accounting estimates,
including fair value.
SEC extends
revenue and
leases effective
dates for
certain PBEs
Coming Soon:
New Hedge
Accounting
Standard
Do you find hedge
accounting daunting?
PwC Partner Beth Paul
highlights two benefits to
the FASB's upcoming
changes. Read it here.
Financial
statement
presentation
Service
concessions:
Accounting for
contracts with
the public
sector
Read how to determine
whether an arrangement
is a service concession
arrangement & how to
account for it.
EITF observer Summary of the
July 20, 2017
meeting
https://www.pwc.com/us/en/cfodirect/issues/lease-accounting.html
08/16/17
Episode 28:
New Lease
standard - Day
one issues
Getting your arms around
the new leases standard?
Listen in to learn what
lessees and lessors need
to know.
08/11/17
Lease
accounting
implementation
issues
See PwC’s answers to
some frequently raised
questions to assist
9/11/2017
Lease Accounting - PwC
SEC announces extended
revenue and leases
effective dates for certain
public business entities.
PwC explains.
06/28/17
How
organizations
are adopting
the new lease
accounting
standards
leveraging their
SAP investment
In this recorded webcast,
we discuss transition
roadmaps, project lessons
learned and technology
capabilities from first
movers and early
adopters alike.
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requirements of common
balance sheet and income
statement accounts.
cloud computing
arrangement. PwC
explains.
companies as they
transition to the new
leases standard.
07/13/17
07/11/17
06/30/17
PwC Partner Beth Paul's
blog discusses what
companies should
remember when
implementing the new
leasing standard, from
embedded leases to
updating systems and
controls.
We summarize the
GASB's new standard on
leases - those expecting it
to mirror the FASB's
standard may be
surprised.
Lease
accounting
webcast
updates and
insights
Our two-part webcast
leasing series discusses
implementation issues,
potential impacts to your
organization, and how you
can prepare to transition
to this new standard. View
the webcasts and earn
CPE credit through our
on-demand version.
Three tips to
help navigate
the new leasing
standard
06/28/17
Disclosures
about recently
issued
accounting
standards (SAB
74) - the user's
view
Trying to write about the
expected impact of
adopting new accounting
standards, like revenue
and leasing? Watch now.
05/08/17
04/18/17
Industrial
insights - A
quarterly
summary for
the Industrial
Products sector
Our summary of
accounting and financial
reporting hot topics
impacting the Industrial
Products sector covers
SAB 74 disclosures,
revenue recognition,
pension cost reporting,
and more.
Lessor
accounting: the
interaction of
leasing and
revenue
Lessors should be aware
of these interactions when
adopting both the new
leasing and revenue
standards.
GASB issues
new lease
accounting
rules
06/06/17
Three
Important Q2
Reminders
Why should you think
about your accelerated
filer status and discount
rates for the new lease
standard in Q2? PwC
Partner Beth Paul's latest
blog provides insights into
three important items to
consider.
Load more
Contact us
Beth Paul
US Strategic Thought Leader, National Professional Services Group
Email
David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group
Email
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9/11/2017
Lease Accounting - PwC
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