Impact of Financial Accounting Standards Board Finance Essay (Essay Sample)
Assignment 1: Impact of Financial Accounting Standards Board (FASB) Accounting Standards Update ASU 2016-02 Leases
Due Week 8 and worth 250 points
Accounting is the language of business, and it is not a dead language! The FASB is responsible for ensuring that all relevant and material financial information is properly codified in Generally Accepted Accounting Principles (GAAP).
The use of off balance sheet leases to distort the real liabilities of companies is a topic of long-lived concern. ASU 2016-02, Leases, is the most recent action of FASB to address this issue.
For this assignment you will select an American company of your choice to write a six to eight (6-8) page report in which you:
Summarize the impact of ASU 2016-02, Leases on the recording of leases.
Discuss at least three (3) elements featured in the current information reported by your chosen company for its leases.
Analyze the impact of the new standard on the reporting of your chosen company’s leases.
Compare and contrast the impact that ASU 2016-02, Leases will have on the financial ratios of your chosen company.
Determine the impact of the changes to accounting for leases on the recommendations of stock analysts for your chosen company.
Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Impact of Financial Accounting Standards Board
Impact of Financial Accounting Standards Board
The use of off-balance-sheet leases to distort the real company's liabilities has been a topic of long-standing disquiet. The new accounting standard (ASU 2016-02, Leases) introduced by the Financial Accounting Standards Board (FASB) now requires companies to recognize liabilities and operating lease assets on the balance sheet. (Trainer, 2018). Reports from the U.S. Chamber of Commerce and the Securities and Exchange Commission indicate that U.S. companies presently have about $2.8 trillion in operating lease obligation currently not appearing on the balance sheet (Rhode, 2019). The new accounting standards require nearly all leases to appear on a company's balance sheet. Like in the previous standards, leases under the new leasing standard are differentiated by two main types: operating and finance (capital) lease and this distinction are crucial as it determines how much and where the rent expense is to be recorded in the income statement. Using Starbucks as an example, this paper summarizes the impact of ASU 2016-02, Leases on the recording of leases, discuses elements featured in the current information reported by Starbucks, analyzes the impact of the new standard on reporting of Starbuck's leases, compares and contrasts the impact of that ASU 2016-02, Leases will have on the financial ratios of Starbucks and determines the impact of the changes to accounting for leases on the recommendations of stock analysts for Starbucks.
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