Good evening sir
I have a question regarding the accounting treatment of operating leases. During recorded classes you mentioned that operating leases are considered off-balance sheet financing. However, I have read that there have been updates to the accounting standards, specifically IFRS 16 and ASC 842, which now require operating leases to be recorded on the balance sheet.
Could you please clarify:
1. Old Standards vs. New Standards: Under the old standards, operating leases were indeed off-balance sheet. But under the new standards, companies must recognize a right-of-use asset and a corresponding lease liability for most operating leases.
2. Impact on Financial Statements: How these changes affect the financial statements, particularly the balance sheet and income statement.
Thank you for your time and assistance in this matter.