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The FASB has recently promoted changes in lease accounting. These changes effectively treat all leases as...

The FASB has recently promoted changes in lease accounting. These changes effectively treat all leases as capital-type leases. What are the ramifications of such a change? Are operating leases a thing of the past?

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As companies begin to digest the new lease accounting standard from the Financial Accounting Standards Board (FASB), we take a look at the implications on financial statements.

Leases are a way to use property or equipment and pay over time. Today, operating leases are off-balance sheet, but the new guidance reflects operating leases with terms greater than one year on the balance sheet with both an asset (the right to use the leased item) and liability (the obligation to make lease payments), similar to capital leases today.

Terminology is changed; today’s capital leases are tomorrow’s finance leases. But classification–whether a lease is operating or finance–is largely the same.

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