Accounting for Leases - Deep Dive

Learning Objectives

• To identify the purpose and effective date of the updated lease standard.
• To discuss the updated Topic 842 – Leases.
• To identify the types/classifications of leases for lessees/lessors.
• To analyze how to account for a lessee’s operating and capital leases and required disclosures.
• To recognize how to account for a lessor's operating, direct financing, sales-type leases, and required disclosures.
• To identify the sale and leaseback issues.

Course Description

In February 2016, FASB issued ASU 2016-02, Leases, which provides new guidelines that change the accounting for leasing arrangements.  To be able to properly account for leases, financial professionals must understand ASU 2016-02 (also referred to as Topic 842). This online CPE course covers information on how leases should be accounted for. The previous leasing standard (ASC 840) had been in existence for almost 40 years. 

Under ASC Topic 842, lessors continue to classify leases as operating, direct financing, or sales-type. While lessees now classify leases as operating or financing leases. Previous guidance only required capital leases to be reflected on the BS. The new guidance requires all leases to be reflected on the BS.  This is a major change for organizations and will cause their BS to swell as leases must now be disclosed on the BS.

The standard's original effective dates were before 2019. In April 2020, due to COVID-19, FASB voted to defer the effective date for ASC 842 for private companies and certain NFPs for one year.  For private companies and private NFPs, the leasing standard will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. For public companies, the leasing standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Major topics discussed in this online webinar by Lynn Fountain:

• What is the definition of a Lease
• How is control defined
• Substantive Substitution Rights
• Lease Classification
• Where does an ROU asset go on the balance sheet
• Classification of Lease
• Types of the lease for Lessor and Lessee
• Lease Payments
• Purchase Options, Discount Rate, And Implicit Rate
• Sales-Leaseback Transactions
• Financial Statement Disclosures

This CPE Accounting webinar covers elements of lease classification for both lessees and lessors and also numerous examples are incorporated as references.

Overview

• What is the definition of a Lease?

  9 mins
• Lease definition and identifying a contract

  20 mins
• ROU asset

  37 mins
• Types of Leases

  50 mins
• Areas of focus

  70 mins
• Sale-Leaseback transaction

  91 mins
• Example of lessee application

  114 mins