The lease rules discussed in the text have an effective date for fiscal years beginning after December 15, 2018. Under U.S. GAAP, the accounting treatment of operating leases for the lessee was quite different than these new rules. Under the old rules, lessees did not include an asset or a liability on their balance sheets related to the lease.

Required: a. Basing your answers on the Basis for Conclusions for ASU 2016-02, Leases (and including citations), explain FASBs reasoning behind changing the accounting treatment for lessees operating leases.

b. Do you think that the right-of-use asset and the lease liability should be included on the lessees balance sheet in an operating lease? Justify your answer.