If your organization leases just about anything and follows Generally Accepted Accounting Principles (GAAP) in the United States or International Financial Reporting Standards (IFRS) elsewhere, then the new lease standard affects you.
If you’re affected, then you need to know certain key dates, starting with the date by when you have to adopt the new standard.
Not all costs related to a lease are included in the leased asset and liability. For example, a lessor may lease a truck and also include a provision to operate the truck on behalf of the lessee. Providing a driver, maintenance and gas are not related to securing the use of the truck and these costs would be considered nonlease components. Another example of a nonlease component is the fee for common area maintenance when renting office space.
Not all arrangements qualify as a lease under the new standard. Of course, sometimes it’s easy to figure out if it’s a lease: renting your office space definitely qualifies as a lease. Copier and vehicle leases are, in fact, leases.
The new U.S. lease standard, ASC 842, is required for public companies starting their fiscal year after December 15, 2018 and all other companies starting their fiscal year after December 15, 2019. Internationally, the cousin of ASC 842 is IFRS 16, which is effective for annual periods beginning on or after January 1, 2019.