ASC Topic 842, Leases: The FASB’s New Guidelines and Their Effect on Leasing Arrangements
New guidelines from the Financial Accounting Standards Board (FASB) require lessees to recognize most leases on their balance sheet through a right-of-use (ROU) asset and corresponding lease liability. This could impact your ratios and certain covenants.
This guide gives the details and explanations you’ll need to:
- Understand the scope and underlying principles of Accounting Standards Codification Topic 842, Leases
- Identify leases
- Distinguish operating leases from finance leases
- Present leases on your balance sheet, income statement, and statement of cash flows
- Account for nonlease components, purchase options, variable lease payments, and initial direct costs
- Navigate complex arrangements involving lease modifications, subleases, sale-leaseback transactions, lease incentives, and related-party leases