FORVIS brings industry best practices and a collaborative approach to supporting management teams in their adoption of FASB ASC 842 and GASB 87.
On Feb. 25, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 Leases (Topic 842), a new standard that will govern the accounting for lease contracts. To affect these changes, this ASU, along with several related ASUs issued subsequently, amends the existing FASB Accounting Standards Codification (ASC) and creates a new Topic 842, Leases.
When ASC Topic 842 is Effective – At a Glance
In the U.S., the standard is effective for private companies for fiscal years beginning after Dec. 15, 2021, and interim periods within fiscal years beginning after Dec. 15, 2022. For public business entities, certain nonprofit entities, and employee benefit plans that file financial statements with the U.S. Securities and Exchange Commission, the standard became effective for fiscal years beginning after Dec. 15, 2018, including interim periods within those fiscal years. Public nonprofit organizations that had not yet issued (or made available to issue) financial statements reflecting the new lease accounting guidance were able to apply the standard for fiscal years beginning after Dec. 15, 2019, including interim periods within those fiscal years.
- PBEs, Certain Not-for-Profit Entities, Employee Benefit Plans that file with SEC
Fiscal years beginning after Dec. 15, 2018 - Public Not-for-Profit Organizations that Had Not Yet Issued Financial Statements
Fiscal Years after Dec. 15, 2019 - Private Companies
Fiscal years beginning after Dec. 15, 2021 - Interim Periods
Fiscal years beginning after Dec. 15, 2022
LeaseVision - Our Solution to the New Lease Standards
Need help implementing GASB 87 and FASB (ASC) 842 for your leases? We've got you covered.
LeaseVision is a powerful accounting solution that can help you adopt lease standards with ease. FORVIS' solution pairs artificial intelligence with robust tools, all backed by the decades-long accounting expertise of our FORVIS professionals.
Our three-part solution is the complete package. It is critical to implementation and gives ongoing support by generating journal entries and disclosure information.
- AI-Powered Lease Analysis – We can apply our artificial intelligence software to your contracts to extract key lease terms from various lease types, helping you quickly summarize and review lease components.
- Implementation Road Map – From checklists to timelines, our road map can provide an in-depth process framework for a smooth implementation.
- Excel-Based Calculation Tool – Our Excel-based tool can help you perform calculations, develop lease amortization schedules, and generate journal entries that comply with the new lease standards.
Want to learn more about how LeaseVision can help you adopt the new standard or schedule a product demo?
GASB 87 Resources
The adoption deadline for GASB’s lease guidance is fast approaching. As you implement these changes, you may face numerous challenges, including separating lease and nonlease components, collecting additional data for disclosures, making necessary IT system updates, capturing remeasurement triggers, and seeking assistance with debt covenants.
For help adopting this standard, explore our latest guidance on GASB.
FASB ASC 842 Resources
The new lease standard replaces existing lease guidance included in ASC Topic 840, Leases. The key difference between existing guidance under ASC Topic 840 and the new guidance under ASC Topic 842 is the requirement for lessees to recognize on their balance sheet all lease contracts with lease terms greater than 12 months, including operating leases. Specifically, lessees are required to recognize on their balance sheet at lease commencement, both:
- A right-of-use (ROU) asset, representing the lessee’s right to use the leased asset over the term of the lease; and
- A lease liability, representing the lessee’s contractual obligation to make lease payments over the lease term.
The new lease standard also requires lessees to classify leases as either operating or finance leases, which are similar to the operating and capital lease classifications under ASC Topic 840. However, the distinction between these two classifications under the new standard does not relate to balance sheet treatment but instead relates to treatment and recognition in the statements of income and cash flows.
Lessor accounting is largely unchanged from current U.S. GAAP, with the exception of some revisions made to ensure consistency with revised lessee guidance and with FASB ASC Topic 606, Revenue from Contracts with Customers.
For help adopting this standard, explore our latest guidance on FASB.
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