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On February 25, 2016, the Financial Accounting Standards Board (FASB) issued its new lease accounting Standard, FASB Accounting Standard Update 2016-02 – Leases. The new standard introduces a right-of-use model that brings most leases onto a lessee’s balance sheet. This could significantly change the accounting for real estate leases, whose leases aren’t typically included on the balance sheet because they are typically classified as operating leases under current United States Generally Accepted Accounting Principles (U.S. GAAP). The new standard retains much of the current lessor accounting model, and lessors should expect very little change in accounting.
Given the significant changes the new standard has on lessee accounting, tenant behaviors could change and influence the way they do business with real estate entities.
Overall, this new standard may not significantly impact the accounting of leases for real estate entities, but could have a noticeable change in tenants behavior in future lease negotiations.
For more information about the new lease accounting standard, visit our Our Thoughts On blog for similar articles or contact Schneider Downs.
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