FASB concludes leases review, cites high costs and misjudgments, no immediate changes

The Financial Accounting Standards Board (FASB) has formally closed its extensive review of Topic 842 on leases, deciding against immediate, sweeping changes.

While the standard successfully brought billions of dollars in off-balance sheet lease obligations onto company balance sheets, there were significant misjudgments regarding the actual cost and complexity faced by companies, according to the board's comprehensive post-implementation review (PIR) report , released on Nov. 20, 2025.

The FASB conceded that both it and, surprisingly, financial statement preparers themselves, grossly underestimated the monumental implementation challenge.

Topic 842 , which phased in for public companies in 2019 and nonpublic entities in 2022, was the FASB's direct response to a 2005 Securities and Exchange Commission (SEC) staff report. That report highlighted a gaping hole in financial transparency: an estimated $1.25 trillion in non-cancelable future cash obligations from operating leases remained hidden in footnotes, distorting companies' true financial leverage. The new standard aimed to rectify this by demanding greater transparency and comparability for investors.

"In general, the standard provided more decision-useful information in lessee financial statements by recognizing lease assets and lease liabilities on the balance sheet," the FASB stated in its summary report. Investors largely welcomed this newfound visibility into lease commitments, deeming the expanded disclosures a marked improvement over previous Generally Accepted Accounting Principles (GAAP).

The unforeseen avalanche of implementation costs

Despite achieving its transparency goals, the PIR report doesn't mince words about the arduous journey companies endured. It detailed an "avalanche" of unforeseen challenges and significantly higher-than-anticipated costs for lessees. The FASB explicitly noted that its initial assumptions were based on feedback from preparers who erroneously believed their existing systems could easily handle the new requirements. This optimistic outlook proved disastrously wrong.

"The Board did not fully consider those costs during its deliberations in part because many preparers communicated that they expected to apply the new requirements using systems and processes similar to those used under legacy GAAP. That erroneous assumption was an important consideration for the Board," the report revealed, painting a picture of miscommunication at the very outset of the standard's development.