The Financial Accounting Standards Board (FASB) is seeking to update its latest lease accounting standards (ASC 842) after several questions arose from private companies and not-for-profits who adopted the standard this year. The standards cover the treatment of real estate and other lease agreements between common entities, but lease arrangements are not always documented for private companies.
Partner Patrick Farrelly noted the adoption of the standards by private companies are what sparked the update, especially as they approach their end of the year accounting. "A lot of the noise is... most private companies don’t really do quarterly reporting and they really do their financial statements at the end of the year so basically they’re coming to the end of the year and realizing they need to implement this standard and now that they are you’re seeing some of these issues arise," Farrelly said.
Farrelly noted there are always some difficulties adopting new standards for the first time and this step by FASB to address questions as they arise are part of the implementation process. "You’re going to keep finding nuances,” he said. “It’s never easy to adopt any new accounting standard."
Read the full article published by CFO Dive.
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