Accounting for Lease
In this Cerini Short, Ted Campbell, CPA, CGFM, CGMA, Manager, explains Lease Accounting.
Several years ago, the Financial Accounting Standards Board (“FASB”) issued new lease accounting standards (“ASC 842”) to try to align some of these issues across all industries and make financial reporting more consistent. The COVID pandemic has pushed off the implementation of ASC 842 for nonprofits and private companies without certain public debt. The deferral is unfortunately coming to an end with adoption required for years starting after December 15, 2021 (calendar year 2022 or fiscal year 2023 entities).
In a nutshell, ASC 842 will require most providers with real property or equipment leases to record both a right-of-use asset (the present value of the future required lease payment stream) and a corresponding liability to reflect, in essence, the asset and liability associated with the required future lease payments (inclusive of renewal options and other provisions that management may anticipate taking advantage of).