From the course: Financial Accounting Foundations

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Working with leases

Working with leases

From the course: Financial Accounting Foundations

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Working with leases

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- From 1976 through 2018, the accounting for leases was among the most deceptive accounting practices in existence. For example, in 2016 alone, these lease accounting standards allowed publicly traded companies around the world to avoid reporting three trillion dollars in obligations under non-cancelable lease contracts. The lease accounting rules were changed starting in 2019. Let's discuss the old bad rules, the new better rules, and the financial statement impact of both. Now, before we go any further, let's define what we mean by a lease. A lease is a contract specifying the terms under which the owner of some property transfers the right to use the property to someone else, without transferring legal ownership. Here's an example. Let's say that I am a package delivery company, like FedEx. I need the use of an airport warehouse for the next 10 years. Rather than buying the warehouse from its legal owner, I can lease…

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