Though delayed due to the COVID-19 pandemic, the new lease account standard will soon be implemented for all U.S. based businesses. If you own a business in the United States and lease anything tied to it, be it vehicles or real estate, Rea & Associates is here to help you and your company prepare.
When Will the New Lease Accounting Standard Go Into Effect?
Beginning December 15, 2021 the U.S. Generally Accepted Accounting Principles (GAAP) requires private entities adopt a new lease accounting standard – Accounting Standard Codification (“ASC”) 842, Leases (“ASC 842”).
Why Have Lease Accounting Standards Changed?
The new lease accounting standard requires companies put long-term leases, right of use assets, and associated liability on the books. This transparency will help third-party users make informed decisions based on potential liabilities and what will be owed in the future.
Who Will Be Impacted?
Owners of U.S.-based businesses with any leases tied to that entity will be affected by this change in accounting lease standards. This includes real estate leases, equipment leases, and operating leases. This change also applies to embedded leases, which are service contracts with a right of use clause in that contract.
How Rea & Associates Can Help
As the deadline approaches it is imperative that your company start preparing for the new lease standards under ASC 842. Luckily, Rea & Associates is here to help. Our lease accounting specialists can ensure your company remains in compliance with GAAP. This will streamline your company’s communications with lenders and other third-party users of your statements.
To get started, download Rea & Associates free Whitepaper on the new lease accounting standard here.
By Cody Niese, CPA (Lima office)