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

38 Pages Posted: 5 Oct 2016 Last revised: 4 May 2017

See all articles by Donald J. Weidner

Donald J. Weidner

Florida State University College of Law

Date Written: November 14, 2016


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.

Suggested Citation

Weidner, Donald J., New FASB Rules on Accounting for Leases: A Sarbanes-Oxley Promise Delivered (November 14, 2016). 72 Business Lawyer 367 (2017), FSU College of Law, Public Law Research Paper No. 816, FSU College of Law, Law, Business & Economics Paper No. 16-14, Available at SSRN:

Donald J. Weidner (Contact Author)

Florida State University College of Law ( email )

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Tallahassee, FL 32306
United States
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