Something Borrowed, Something New: Get Ready for the New Lease Accounting Standard

The new accounting standard on leases (ASU 2016-02, “Leases”) contains some dramatic changes that organizations will need to prepare for. Because almost all organizations have a lease contract, financial and operating executives should start exploring now, before the standard goes into effect, how their organizations’ financial statements will be affected and the changes that should be made as a result.

Most prominently, the new guidance changes the way operating leases are accounted for, so that they will now be reflected on the lessee’s balance sheet. As a result, balance sheets will be bigger and stakeholders will have a more complete and comprehensible picture of an organization’s leasing activities and their effects on the financial statements.