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On February 25, 2016, the Financial Accounting Standards Board (FASB) issued its new lease accounting standard, FASB Accounting Standard Update 2016-02 – Leases. The new standard introduces a right-of-use model which brings most leases onto a lessee’s balance sheet. This could significantly change the accounting for leases involving real estate, equipment and fleet, whose leases aren’t typically included on the balance sheet because they are usually classified as operating leases under current United States Generally Accepted Accounting Principles (U.S. GAAP). The new standard retains much of the current lessor accounting model, and lessors should expect very little change in accounting.
Given the significant changes the new standard has on lessee accounting, automobile dealers (dealers) who currently have a significant amount of operating leases should consider the impact that the new standard will have on their financial statements including the following:
Overall, this new standard may have a significant impact on dealer’s balance sheets and related financial statements. Dealers still have time to consider the impact that this standard will have on their financial statements, but should begin assessing what that impact may be and start discussing the impact with their financial statement users. The new guidance is effective for public entities for fiscal years beginning after December 15, 2018 and for fiscal years beginning after December 15, 2019 for all other entities.
For more information, please download a copy of the Schneider Downs lease accounting whitepaper, which discusses the new lease standard in more detail and contact us with any questions.
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