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The new lease standard went into effect earlier this year.  The idea behind the standard is to focus on increased transparency and comparability – providing financial statement users with more information about an entity’s leasing activities.

From now on the lessee will recognize a right-of-use (ROU) asset and a lease liability for all leases, including operating leases, with a term greater than 12 months, which may significantly increase reported assets and liabilities for some lessees. The critical accounting determination will be whether a contract contains a lease. The lease classification distinction will affect how lessee’s measure and present lease expense and cash flows – not whether the lease is on- or off-balance sheet as it does under current US GAAP.

This will have a great impact on one of my client in the transportation business, they have transitioned over to leasing all tractors and trailers a couple of years ago.

To discuss the impact on your business, give us a call.

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