On February 25, 2016, the FASB issued a new accounting standard regarding financial reporting of leases. Under the new standard, lessees will be required to report all long-term leases on their balance sheet. The new standard aims to increase comparability and transparency between different companies and provide investors with a truer representation of more precise information about the company's liabilities. The new financial reporting standard will retain capital leases and operating leases. The existing classification criteria for distinguishing the two leases remain essentially unchanged. However, there are no longer explicit bright lines as the board moves from rules-based to principles-based accounting. Under the new standard, a lease is defined as a contract that gives tenants the right to “control” the use of the “identified asset.” “Control” means accepting substantial monetary benefits and having the right to decide how to use the asset. To meet the requirement for an identified asset, it must be physically distinct, which does not include natural gas or biological assets. The tenant must record the rights and obligations associated with all leases as a right-of-use (ROU) asset and corresponding liability with the present value of future rentals. In other words, the balance sheet impact of capital leases and operating leases is the same upon initial recognition. However, the effect on the income statement and subsequent cash flows would be significantly different depending on the classification of the lease. For income statement purposes, lessees of capital leases must separately recognize depreciation expense on the ROU asset and interest expense on the lease liability, which......mid paper......have to work on additional tasks to align a single model subsidiaries. Another notable difference between the two standards is their respective alternatives for accounting for small rental contracts such as printers, tablets and office equipment or accessories. IFRS provides comprehensive guidance on what defines a small lease and does not require such leases to be recognized on the balance sheet. On the other hand, the FASB does not provide any exemption for small note leases, as the FASB still maintains accounting rules that allow exclusion based on significant user involvement. There are also differences in the date of entry into force between these two standards. Under the FASB, public companies will be required to adopt the new standard for the fiscal year following December 15, 2019. While all users of IFRS will be required to implement IFRS 16 for the annual financial reporting period after January 1, 2019.