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Lease Accounting Update
(

Learning objective
After completing this chapter, you should be familiar with:
A brief overview of the FAS B's proposed comprehensive new lease accounting guidance.

I. The end is near...
In May 2013, the FASB issued proposed ASU, Leases (Topic 842): a revision of the 2010 proposed
Accountin-g Standards Update, Leases (Topic 840). The comment period ended in September 2013.
Notice that the new lease accounting guidance is moving from FASB Accounting Standards Codification
(ASC) 840, Leases, to a new Topic, ASC 842, Leases, which will supersede ASC 840.
The new lease accounting guidance in ASC 842 will apply to all leases except for:
Leases of intangible assets;
Leases to explore for or use minerals, oil, natural gas, and similar non-regenerative resources; and
Leases of biological assets, including timber.
The new guidance is intended to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations, and the risks to which it is exposed from entering into leasing transactions.
Under existing accounting standards, a majority of leases are not reported on a lessee's balance sheet even though the amounts involved can be substantial. In addition, lessees and lessors are required to classify their leases as either capital leases or operating leases and to account for those leases differently. For a lessee, capital lease assets and liabilities are recognized on the balance sheet while operating lease assets or liabilities are not. When assets and liabilities for leases are not recognized on the balance sheet, most financial statement users make adjustments using disclosures and other available information to estimate the effects of leases on a lessee's financial statements.
Currently, the FASB is continuing its

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