Ahead of the curve
Facing questions about how companies are expected to transition to the new lease accounting requirements beginning in 2019, the Financial Accounting Standards Board (FASB) explained during a recent meeting what it had in mind when it issued its now-codified guidance.
The new lease accounting standard requires all companies to reflect on the face of the balance sheet and through the income statement virtually all leased assets and their associated liabilities, beginning with public companies in 2019.
The standard does not allow companies to follow a full retrospective method of adoption, which would mean recasting all prior periods in financial statements as if the standard had always been in place.
Instead, companies are required to follow a modified retrospective transition method with some optional practical expedients provided in the standard. Companies can apply a package of practical expedients, without cherry picking some and bypassing others, and they can apply an additional practical expedient about hindsight, according to the standard.
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