ASC Topic 842 – Accounting for Leases
The FASB’s new lease accounting standard has rapidly approached for organizations with operating and finance leases. Under Accounting Standards Codification (“ASC”) Topic 842, Leases (the “new standard”), all lease obligations (operating and finance) are required to be recognized as an asset and a liability on the statement of financial position for all non-public entities effective for fiscal periods beginning after December 15, 2021 (i.e., 2022 calendar year-ends and 2023 fiscal year-ends). Under previous Generally Accepted Accounting Principles (“GAAP”), capital leases were required to be recognized as an asset and a liability on the statement of financial position with future commitments related to operating leases being disclosed in the footnotes to the financial statements. The primary objective of this new standard is to provide users of financial statements with greater transparency relating to an organization’s lease obligations.