Lease Accounting Tax Impact

Under the new leasing standard, leases will not be treated differently for U.S. federal income tax purposes. However, the increase in assets and liabilities could impact a variety of financial measurements, which may in turn change the amount of taxes paid.

Key Considerations

1. How will deferred taxes change? Consider how bringing operating leases onto the balance sheet could change the asset value under GAAP but not under the US tax code, resulting in a need for deferred taxes.

2. How will state taxes change under the new accounting rules? Consider whether a state collects property or franchise taxes which could change under the new standard.

3. Will corporations change their processes due to the new standards? How will lease data be tracked to ensure accuracy for tax purposes? Also consider how changing processes may impact international taxes.

What the Experts Think

Links to Additional Resources

Tax implications of ASC 842: Lease accounting standards

March 19, 2019

In this recorded webcast, RSM covers how organizations can best handle the possible tax implications of ASC 842 and how technology can help make for an easier transition.

Tax Accounting Perspectives: New accounting update requires changes to accounting for leases

February 14, 2018

Deloitte's Tax Accounting Perspectives document on the tax impacts of the new lease accounting standard, ASC 842, covers the potential impacts of the new standard to deferred taxes, state and local taxes, and the transition rules.

Taxes and the New Leasing Standard (ASC 842)

January 9, 2018

This article from GAAP dynamics reviews the tax impact of the new lease accounting standard, ASC 842, on lessees and lessors, including the change to deferred taxes that lessees can expect to see.

6 tax issues CFOs should understand about FASB’s new lease accounting standard

October 4, 2017

This article from Grant Thornton reviews the 6 major tax impacts of the FASB's new lease accounting standards, ASC 842, including deferred and state taxes.

Potential tax considerations associated with the new leasing standard

November 15, 2016

In an effort to improve transparency and provide more meaningful information to users of financial statements, the FASB issued an Accounting Standards Update on Topic 842, Leases, on February 25, 2016. This new guidance will significantly impact the U.S. GAAP financial statement accounting for leases by lessees, eliminating the traditional concept of an operating lease.

Tax considerations of new lease standard

April 1, 2016

On Feb. 25, 2016, FASB issued its new lease accounting standard, Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). This new standard will affect all companies that lease, or sublease, assets in the nature of property, plant or equipment.

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