Accounting Update for Not-for-Profit Entities: Leases
In February 2016, the Financial Accounting Standards Board (FASB) issued one of the most sweeping changes to generally accepted accounting principles in the United States (GAAP) – Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The new lease accounting standards and subsequent amendments require lessees to report all leases with a term greater than 12 months, including operating leases, on the statement of financial position.
Topic 842 also requires expanded disclosures, aimed at providing financial statement users enough information to assess the amount, timing, and uncertainty of cash flows arising from leases. The principle of Topic 842 is that a lease conveys the right to use an asset for a period of time in exchange for consideration.
KSM’s Not-for-Profit Services Group has summarized the full standards update, including the amended effective dates, into this brief guide, which outlines the primary changes to the lease reporting of not-for-profit organizations.
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