The FASB recently released a post-implementation review of its 2016 leasing standard, revealing that while it succeeded in providing investors with better insights into leasing activities, the implementation costs were significantly higher than anticipated.
The primary objective of the leases standard (Topic 842) was to provide investors and other financial statement users with relevant information by requiring that lessees recognize lease assets and lease liabilities that arise from all leases on the balance sheet and to disclose key information about their lease transactions.
In general, the report says the leases standard achieved the objective of providing investors and other financial statement users with more useful information about a lessee’s leasing activities.
But “many preparers experienced significant costs to apply the leases standard initially and on an ongoing basis, most notably because their existing systems and processes were not equipped to account for all of their leases on the balance sheet,” the report states. Read more.