Chapter 18, Problem 1BCC

Basis for Conclusions Case 1: Operating Lease Treatment versus Finance Lease Treatment

The lease rules discussed in this chapter have an effective date for fiscal years beginning after December 15, 2018. Under U.S. GAAP, the accounting treatment of operating leases for the lessee were quite different than these new rules. Under the old rules, lessees did not include an asset or a liability on their balance sheets related to the lease.

Required

1. a. Basing your answers on the Basis for Conclusions for ASU 2016-02, Leases (and including citations), explain FASB's reasoning behind changing the accounting treatment for lessee's operating leases
2. b. Do you think that the right-of-use asset and the lease liability should be included on the lessee’s balance sheet in an operating lease? Justify your answer.