Abstract

https://ssrn.com/abstract=2847821
 


 



New FASB Rules on Accounting for Leases: A Sarbanes-Oxley Promise Delivered


Donald J. Weidner


Florida State University College of Law

November 14, 2016

Business Lawyer, Forthcoming
FSU College of Law, Public Law Research Paper No. 816
FSU College of Law, Law, Business & Economics Paper No. 16-14

Abstract:     
Congress responded to the financial accounting scandals of the new millennium by enacting the Sarbanes-Oxley Act of 2002, which required the Securities and Exchange Commission (“SEC”) to study filings by issuers and report on the extent of off-balance sheet arrangements, particularly those involving leases. In 2005, the SEC reported that there “may be approximately $1.25 trillion in non-cancellable future cash obligations committed under operating leases that are not recognized on issuer balance sheets, but are instead disclosed in the notes to the financial statements.” Accordingly, the SEC Report requested the Financial Accounting Standards Board (“FASB”) to craft new rules to record more lessee liabilities on the balance sheet. In 2016, the FASB issued sweeping new rules that affect virtually every firm that leases assets “such as real estate, airplanes, and manufacturing equipment.” In a dramatic change in approach, every lease for more than 12 months will be capitalized and recorded on the lessee’s balance sheet as reflecting both a “right of use asset” and a corresponding liability. The new rules move away from the formalism of bright line rules and toward an affirmative obligation to record economic substance. This article provides an overview of the history, policy and mechanics of the new rules, which are likely to have significant economic impact on many firms.

Number of Pages in PDF File: 39


Open PDF in Browser Download This Paper

Date posted: October 5, 2016 ; Last revised: November 15, 2016

Suggested Citation

Weidner, Donald J., New FASB Rules on Accounting for Leases: A Sarbanes-Oxley Promise Delivered (November 14, 2016). Business Lawyer, Forthcoming; FSU College of Law, Public Law Research Paper No. 816; FSU College of Law, Law, Business & Economics Paper No. 16-14. Available at SSRN: https://ssrn.com/abstract=2847821

Contact Information

Donald J. Weidner (Contact Author)
Florida State University College of Law ( email )
425 W. Jefferson Street
Tallahassee, FL 32306
United States
850-644-4834 (Phone)
850-644-7527 (Fax)

Feedback to SSRN


Paper statistics
Abstract Views: 190
Downloads: 93
Download Rank: 222,297