ASU 2016-02 (Leases)

ASU 2016-02, issued by the Financial Accounting Standards Board, changes how companies account for leases in their financial statements. Previously, leases were classified as either operating or capital leases, with only capital leases appearing on the balance sheet. This update requires all leases longer than one year to be recorded as assets and liabilities on the balance sheet, providing a clearer picture of a company's financial obligations. This enhances transparency, making it easier for investors and stakeholders to assess a company’s financial health and understanding of its leasing arrangements.