New FASB Standards Are a Potential Game-Changer for Lease Negotiations

October 19, 2016

Commercial Real Estate

The new leasing standard released in February 2016 by the Financial Accounting Standards Board (FASB) will unquestionably change the dynamics of lease negotiations moving forward. Since most businesses are involved in some type of leasing arrangement, you need to prepare for the new FASB standard as it may impact your company’s bottom line.

The new FASB leasing standard takes effect for the interim and annual reporting periods of public business entities, as well as certain not-for-profits and employee benefit plans, for fiscal years beginning after December 15, 2018. For all other entities, including private companies, the new lease accounting standard is effective for annual reporting periods beginning after December 15, 2019 and interim periods beginning after December 15, 2020.

The new standard will require lessees to recognize assets and liabilities on their balance sheets for most of their leases. Regardless of their length and term, all leases are subject to the recognition criteria in the new standard. Under an available accounting policy election, a lessee may elect to not record an asset and a liability for a lease with a term of 12 months or less, as long as the lease does not include a purchase option that the lessee is reasonably certain to exercise.  Source: National Real Estate Investor.  Author:  Howard Barash.  Learn more…


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