Question: Based on what I answered, how can I reply to this comment supporting my opinion? (It can be short.)

Comment: Prior to this pronouncement, future lease obligations were disclosed in a note to the financial statements, so investors were well-aware of the future obligations. That, to me, is the most important disclosure relative to what we once knew as operating leases. Given that the lessee is never going to own the leased asset, it would seem to me that the asset portion of the new requirement boosts the balance sheet with fake assets. I will concede the the lease liabilities are a good addition. So my question is, why do you think issuers asked for this? It has a net zero impact on the financials.

1. What is the main change offered by this pronouncement?

The main change is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating lease. Lessees should be required to recognize the assets and liabilities arising from leases on the balance sheet. The Board consulted extensively on the approach to lease expense recognition and considered a number of alternatives.

2. How were operating leases accounted for in the past?

It didn't require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. it had made long-standing requests from many users of financial statements and others to change the accounting requirements.

3. Is this an improvement? Support your answer.

In my opinion, it is an improvement.

First of all, as mentioned in the Summary, it increases transparency and comparability among organizations. Also, it gives a complete and understandable picture of an entity's activities for many entities that enters into a lease. With an enough information, users supplement the amounts recorded in the financial statements so that they can understand more about the nature of an entity's leasing activities. In addition, it has implementation guidance to assist entities in determining whether the transfer of an asset in the context of a sale and leaseback transaction is a sale.