Authored By: Dustin Wood, CPA. Dustin has been with the firm 7 years and is the audit manager here at Cook Martin Poulson, PC. He specializes in financial statement services.
Significant changes to accounting standards for lease accounting are on the horizon as part of a convergence project between accounting standards setting bodies in the United States and internationally. Potential changes to lessee accounting would do away with current accounting requirements, which provide a bright line test to determine whether a lease is an operating lease or a capital lease for the lessee. Operating lease payments are currently expensed as rent and lease payments while capital leases require the recording of an asset and a liability, as if the asset were being purchased. Based on current discussions, changes to lease accounting would require recording assets and accompanying liabilities for all leases, and would require adjusting lease accounting for leases already in place. The proposed changes are currently still in the discussion stage, but if finalized, would require analysis by companies and their accountants to determine the effects of the changes and what adjustments may be necessary.
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