Volume 27, No. 5

The year: 1976. The Cray-1 supercomputer is released. The Apple Computer Company is formed. The Ramones release their first album. Jimmy Carter was president. And the three-year-old FASB released its thirteenth financial accounting statement, this one on lease accounting. That standard unified the accounting and disclosures for lessees – unified in the sense that the majority of lessees never recognized any asset or obligation stemming from their leasing arrangements. That was not FASB’s intention when they developed the standard: it was expected to put lessee obligations onto balance sheets.

Slow-forward 42 years and six presidents later. There’s a supercomputer in your pocket, and chances are good that it’s an Apple iPhone. All four original members of the Ramones now play on that big stage in the sky. The only thing that’s the same is - lease accounting. Through the end of this year, the leverage used by lessees to control productive assets remains as invisible on balance sheets as it did in 1976 - and before.

 In a fitful process spanning several decades, the FASB finished updated the accounting for leases in 2016. The new accounting for leases will be effective for companies with calendar year ends starting January 1, 2019. In the first quarter of 2019, the invisible leverage will become visible – and it will change the complexion of balance sheets for many companies, many of them in the already-beleaguered retail industry.


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