The new accounting standard is being implemented following concerns regarding the lack of transparency relating to material lease obligations that have been reported off-balance sheet.

However, differences of opinion between the FASB and the International Accounting Standards Board (IASB) mean there will be different approaches taken between the international financial reporting standards (IFRS) and US GAAP in the profit and loss account treatment of such leases.

According to reports, the International Accounting Standards Board (IASB) will soon determine the start date of the new rules within IFRS, which has been recommended to become binding for accounting periods starting on or after 1 January 2019.

In the US, the final Accounting Standards Update (ASU) is expected to be published in early 2016 and will be effective for public companies for fiscal years (and interim periods within those fiscal years) beginning after 15 December 2018; for private companies, the standard will be effective for annual periods beginning after December 15, 2019. 

It added that early adoption will be permitted for all companies and organisations upon issuance of the standard.

As a next step, the FASB staff will complete a “ballot draft” of the ASU that includes all of the Board’s final decisions.

“We believe that this new standard is important because it will provide investors, lenders and other users of financial statements a more accurate picture of the long-term financial obligations of the companies to which they provide capital,” said FASB chairman Russell G Golden.