The standard requires companies that lease assets (real estate, airplanes, manufacturing equipment, etc.) to recognize the assets and liabilities for the rights and obligations created by those leases on the balance sheet. A lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months.
The standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. It aligns the accounting rules with a company’s risk management activities, better reflects the economic results of hedging in the financial statements, and simplifies hedge accounting treatment.
The standard establishes consistent principles (regardless of industry or geography) to report useful information about the nature, amount, timing, and uncertainty of revenue from contracts with customers. Public companies were required to apply the standard starting in 2018, private companies start adopting the standards in January 2019.
The standard reduces cost, minimizes complexity, and improves financial reporting for share-based payments issued to nonemployees. It aligns the accounting for share-based payments for nonemployees and employees and makes it easier for companies to account for the share-based payments they provide to service providers, suppliers, and other people that are not employees.
The standard addresses certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act. While companies are not required to apply the standard until January 2019, many have already adopted the standard.
For information on more financial accounting and reporting standards becoming effective on January 1, 2019, visit the FASB website