Posts Tagged: Lease Accounting Standard

FASB Proposes Delay to Effective Date of Leases Standard

April 21, 2020 update: To provide accounting relief and clarity during the COVID-19 crisis, the FASB published an exposure draft with proposals to delay the effective dates for Leases (Topic 842). Find more information here.

The FASB has taken the next step in formally delaying the effective date of the Leases standard.  They are also delaying the effective date for two other new ASUs that impact credit loss accounting and the accounting for derivatives/hedges.

A recent FASB News Alert was issued, noting that the FASB has issued an ASU exposure draft to change the effective dates of these ASUs. 

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How will the New Lease Accounting Standard Affect Your Debt Covenants?

April 21, 2020 update: To provide accounting relief and clarity during the COVID-19 crisis, the FASB published an exposure draft with proposals to delay the effective dates for Leases (Topic 842). Find more information here.

After a long wait, the Financial Accounting Standards Board (FASB) approved the new lease accounting standard (Accounting Standards Update 2016-02 “ASU 2016-02”) in February 2016. For public companies, reporting requirements will come into effect for years beginning after December 15, 2018.  For all other businesses, these requirements will take effect for fiscal years beginning after December 15, 2019.

Possible impact on lending requirements

The FASB acknowledged that the additional lease liabilities recognized upon adopting ASU 2016-02 could cause some businesses to violate debt covenants or affect access to credit.

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