New Lease Accounting Standards

Lease Accounting Transition

The transition from ASC 840 to ASC 842 and from IAS 17 to IFRS 16 can be a complicated and costly process for companies who have previously been able to record operating leases in the footnotes. However, there are options that can help bring all of these operating leases onto the balance sheet, including expedients and software technology.

Key considerations when choosing between options:

  • How will the options differ under ASC 842 and IFRS 16? While similar, there are some differences between the expedients the two offer.
  • What are the pros and cons of the expedients for specific leases? Consider costs, whether leases will be classified differently under the new standards, and whether the new standards could act beneficially on the balance sheet.
  • How will different valuation options impact the accuracy of the asset measurement?
  • Can an option be applied lease-by-lease, or must it be applied to all leases?

What the Experts Think

Links to Additional Resources

FASB Approves New Transition Method

FASB proposed an additional transition method for ASC 842 that would allow lessees to adopt the standard by recognizing a cumulative effect adjustment at the date of adoption, rather than restating comparative periods. This was officially approved July 2018.

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KPMG's Perspective

In this document, KPMG reviews the new IFRS leasing standard and the transition options and expedients available.

KPMG reviews how the new FASB transition method will affects lessees.

PwC's Perspective

This PwC document compares the transition approaches available under IFRS 16.

This PwC document provides guidance for the transition from ASC 840 to ASC 842.

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