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Introduction

1.4 Disclosures

The leases standard includes extensive disclosure requirements intended to enable users of financial
statements to understand the amount, timing, and judgments related to a reporting entity’s accounting
for leases and the related cash flows. The leases standard requires disclosure of both qualitative and
quantitative information about leases. See LG 9 for information on disclosures.

1.5 Transition and effective date

The leases standard is applicable for most entities starting in 2019. Public business entities are
required to apply the leases standard for annual reporting periods (including interim periods therein)
beginning after December 15, 2018. Certain not-for-profit entities, and employee benefit plans that file
financial statements with the SEC, are also subject to the transition date applicable to public business
entities. All other entities are required to apply the leases standard for annual periods beginning after
December 15, 2019. Earlier application is permitted for all entities as of February 25, 2016, the
issuance date of the final standard.

The leases standard is required to be applied to leases in existence as of the date of initial application
using a modified retrospective transition approach; a full retrospective transition approach is not
permitted. Reporting entities may elect to apply the transition approach either as of the beginning of
the earliest period presented in the financial statements – in which case it would restate its
comparative periods, or as of the beginning of the period of adoption – in which case it would not
restate its comparative periods.

The transition guidance includes optional provisions intended to reduce the burden of the
implementation of the leases standard. Most significantly, the classification of existing leases and
whether an arrangement contains a lease do not need to be reassessed. However, the relief provisions
can only be adopted as a package. For example, a reporting entity may not choose to reassess whether
an existing arrangement contains a lease upon transition, but not reconsider the classification of
existing leases. Lessee’s may also apply hindsight with respect to judgments around lease renewal
options and purchase options.

As a result, lessees and lessors may generally carryforward their existing accounting balances when
adopting the new guidance. See LG 10 for additional information about transition and the effective
date of the leases standard.

Finally, transferors and transferees of easements and rights-of-way that had not previously accounted
for such rights as leases (due, in part, to ambiguous accounting guidance), may continue to account for
those existing arrangements as they had, until such arrangements are modified. The Easements
entered into or modified on or after the effective date must be evaluated under ASC 842. See LG
2.3.2.1 for additional information about evaluating easements.

1.6 Implementation guidance

Topics addressed in the implementation guidance and illustrative examples accompanying the leases
standard include the following.

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