- August 1, 2016; Vol. 3, Number 8

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On Balance: New accounting standards require leases be recorded on balance sheets, which has implications for real estate owners

by Loretta Clodfelter

With perhaps less fanfare than it deserves, the Financial Accounting Standards Board (FASB, which regulates accounting within the United States) earlier this year issued a new accounting standard for the treatment of leases under Generally Accepted Accounting Principles, or GAAP. The International Accounting Standards Board (IASB, which regulates accounting outside the United States) did the same for International Financial Reporting Standards, or IFRS. The upshot is, when the change takes effect, every single lease will need to be recorded on balance sheets.

A lease for Manhattan headquarters space? On the balance sheet.

A leased fleet of delivery vehicles? On the balance sheet.

The third-floor leased copier? On the balance sheet.

The only exceptions are short-term leases — i.e., leases of 12 months or less — and, for companies that follow IFRS, low-value leases, generally described as those involving an asset of $5,000 or less.

Jeff Beatty, a

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