The new standard will include substantial changes to lessee accounting that may require preparers to implement new systems and internal controls and will result in substantial additions of lease obligations to many balance sheets. Lessor accounting will experience less change under the new standard.
When FASB's staff is finished preparing the final draft of the standard, the board will take a final vote by written ballot.
In addition, FASB voted 4—3 to have the staff prepare a final draft of a new standard for classification and measurement of financial instruments.
Although the leases standard began as a convergence project designed to harmonize U.S. GAAP with IFRS, FASB and the International Accounting Standards Board (IASB) ultimately could not reach agreement on some key issues.
Nonetheless, FASB voted in favor of an effective date that's similar to the IASB's, and an IASB spokesman said the board expects to coordinate its release of the standard with FASB's.
FASB's standard will take effect for public companies in fiscal years beginning after Dec. 15, 2018, including interim periods within those fiscal years. For private companies, the standard will be effective for annual periods beginning after Dec. 15, 2019. Early adoption will be permitted for all organizations upon issuance of the standard.
The SEC staff recommended in 2005 that accounting guidance for leases be reconsidered. Since then, FASB and the IASB have been working to come up with a standard that would address criticism that accounting for lease transactions does not represent the economics of all leases, in part because most of them are not reflected on the balance sheet.