New Lease Accounting Standards

Who is affected and how?

One of the many reasons companies lease equipment and products is how they can claim it on their balance sheet. It is listed as an operating lease in the footnotes as “off balance sheet”. This means the item leased is considered an asset to the company and the lease itself has tax insentives, which in turn improves the company’s financial ratios.

But there are many companies that have over 50% of their leasing commitments listed as “off balance sheet”. This makes it difficult for investors to get an accurate read on the company’s worth. The new standards are being put into place with the intent to protect investors and make the leases more transparable.

The new standards can be found here:

The complete report can be found here:

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