New Lease Accounting Standards

Lease Accounting for the Health Care Industry

Lease accounting for the health care industry will change under the new standards. Health care companies lease a diverse range of assets from manufacturing space for drug compounds, to lab equipment and hospital space.

The new leasing standards will require health care companies to update their accounting policies based on the new principles. In some cases, extensive analysis may be required to arrive at judgments on how to apply the standards to certain lease types.

Key considerations for health care companies include:

  • How are customized or non-substitutable assets in supply contracts treated under the new standards? Consider assets like medical and lab equipment.
  • Do contracts to use manufacturing space for medication creation contain leases? Consider whether the pharmaceutical or manufacturing company has control over the space.
  • How are lease and non-lease components separated in a contract? Consider arrangements that contain multiple provisions for items like buildings, land, and maintenance.
health care - lease accounting

What the Experts Think

Links to Additional Resources

Healthcare

In depth: Pharmaceutical and Life Sciences industry supplement to leasing standard

pic health care - lease accounting

In this supplement, PwC describes the impacts of the new lease accounting standards on the pharmaceutical and life sciences industry, bringing changes to matters like embedded leases, allocation, and more.

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How the FASB’s new leases standard will affect health care entities

EY health care - lease accounting

In their "Technical Line" publication, EY details the ways in which ASC 842 could bring changes to the health care industry, from identifying lease and non-lease components to assets.

Read More

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