Skip to Content
Woman in an office writing on a notepad
Article

ASC 842 new GAAP leasing standard: Tax considerations

February 3, 2021 / 2 min read

The Financial Accounting Standards Board’s new standard for leasing provides significant changes for lease accounting, particularly as it relates to lessees. Learn more about the tax considerations of these changes.

The Financial Accounting Standards Board’s (FASB) new standard for leasing (ASC 842) provides significant changes for lease accounting, particularly as it relates to lessees. Public companies are required to implement the new standard on financial statements for periods beginning after Dec. 15, 2018, with nonpublic companies required to implement for periods beginning after Dec. 15, 2021.

The new standard represents a major change in lease accounting. The standard will require all leases to be reported on the balance sheet and may require changes to lease classification and measurement. Many companies are reassessing their lease agreements and implementing new processes to account for leases, with some companies implementing new software systems to track leases. As these changes are being made for financial statement purposes, it’s important to consider the tax impacts.

The new standard doesn’t change the tax accounting methods for leases; there have always been differences between financial and tax accounting rules related to leases. However, as companies develop a new process to track and account for leases on their financial statements, they may need to take a fresh look at tax lease accounting methods, too.

Action items for taxpayers on ASC 842

The standard will require all leases to be reported on the balance sheet and may require changes to lease classification and measurement.

How we can help with the new leasing standard

Not sure where to begin? Our team can work with you to identify the proper tax lease classification and accounting. We’ll also assist with implementing new processes to track leases effectively for tax purposes. Additionally, we’ll help you evaluate any changes in methods of accounting and the impact on other tax strategies. Give us a call.

Related Thinking

Two employee benefit professionals talking outside of an office.
March 14, 2025

Are you meeting the Form 5500 filing requirements for your employee health and welfare benefit plans?

Article 3 min read
View of government building reflected in water.
November 21, 2024

2025 tax legislation: The future of business tax

Article 15 min read
View of U.S. government building at night.
November 21, 2024

Election results set the stage for extension of Trump tax cuts

Article 16 min read