Category: Lease accounting

2019 is a big year in lease accounting.  In 2019 (which began December 15, 2018 for fiscal year reporters), publicly traded companies are required to comply with the new accounting standard (ASC 842) and are required to recognize leases greater than 12 months on their balance sheet.  In 2021 (beginning on December 15, 2020 for fiscal year reporters), all other entities (i.e., private companies including non-profits) will be required to comply with this new standard.  Note, given the challenges facing compliance, FASB recently agreed at their July 17, 2019 meeting to extend this effective date for private companies from 2020 to 2021.  It is expected that over $2 Trillion will be transferred to US companies’ balance sheets.  As I previously wrote (Lease Accounting Change Gets the Go-Ahead ), financial transparency is the driver of this new standard which was developed in the wake of the great recession.  “We believe that this new standard is important because it will provide investors, lenders and other users of financial statements a more accurate picture of the long term financial obligations of the companies to which they provide capital,” said FASB Chairman Russell G. Golden.  Now that it is official, in this post I highlight what office tenants should be doing to comply with this new standard.  I am joined on this post by Mirela Gabrovska of MBG Consulting, a national expert in lease administration and auditing.