The FASB’s latest lease accounting proposal would make fundamental changes in the accounting for leases. Even though some details are controversial and may be fine-tuned before the new standard is finalized, companies should become familiar with the proposal as it stands now because it is expected to have significant business as well as accounting implications.
While no single set of questions will work for every company, we’ve developed these five questions to help you perform a thoughtful and thorough assessment of the potential impact of the FASB’s lease accounting proposal on your business. In effect, each question is a step in the analytical process.
- Which of our current agreements fall within the scope of the proposed guidance and meet the definition of a lease?
- How would the application of the proposed guidance affect our financial statements, including the income statement and the balance sheet?
- Would the effects of the differences between the proposed guidance and the current guidance have any regulatory or tax implications for our company?
- Would the proposed guidance require any changes in our processes, systems or controls?
- What would we do differently if this proposed guidance were to be adopted? Would the proposed guidance prompt any changes in strategy — such as lease-versus-buy decisions?
To help companies sort through the details of the FASB’s 339-page proposal, Mayer Hoffman McCann has issued this MHM Messenger that provides a brief overview of a general assessment approach. Also see our FAQs companion piece that answers many questions about this topic.