A lease is a contract wherein the lessee (user) has to pay consideration to the lessor (owner) for use of an asset for a specified period of time.

The new leasing standard is one of the most significant recent changes in accounting. ASC 842 strives to ensure that all leases are recorded on the balance sheet. The new standard defines how entities should account for leases. The new standard replaces the previous US GAAP standard 840. The aim of ASC 842 is to address a major loophole in ASC 840 – off-balance-sheet operating leases. The reason for implementing changes in the standard is to allow increased visibility into leasing obligations of the entity to the users of financial statements.

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OVERVIEW

The new lease accounting regulations are set to change the way companies account for leases. The new standards will require entities that lease assets, or “lessees,” to recognize on their balance sheets assets and liabilities of such leases.  The guidance requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. The new standards aim to aid investors and other users of financial statements to understand the cash flows from leases.

COMPARATIVE ANALYSIS OF ASC-842 AND IFRS 16

COMPARATIVE ANALYSIS OF IFRS 16 AND IAS 17

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