In the past, lease accounting theory was rooted in rent vs own (or financed). The new lease accounting rules are based on whether you have committed cash flows. If you have committed cash flows, then that obligation goes on the balance sheet.
On the balance sheet, lessees will recognize a “right to use the leased asset” as an asset and the obligation as a liability. If the lease is a “finance” (or capital) lease, lessees will recognize expense by amortizing the asset and recognizing interest expense on the obligation. If the lease is an “operating” lease, lessees will recognize rent or lease expense.
It is important to realize that economic reality has not changed. What has changed is how leases are accounted for and reported. What I mean by this is that a company that had off-balance sheet financing of its equipment, for example, had to make rent/lease payments under the lease that were recognized in the income statement as expense. The commitment of those cash flows was not reported on the balance sheet. Now, that company will still make exactly the same payments it did before, but these obligations will be on their balance sheet making them to appear to be more leveraged than they were before. But the reality is that they always had those commitments and their cash flows have not changed at all.
If you are a borrower with loan covenants that limit the amount of additional debt you can take on, and you use leases too, then you should begin a conversation with your banker to revise these covenants. If your company was viable before, then all other things equal, your company will be viable after you implement this new standard. Your company has exactly the same commitments or obligations and cash flows it had before. All that will change is how you account for and report your leases.
If you are a banker, you should approach your borrowers and let them know that you understand economic reality has not changed. You should begin to evaluate debt covenants and accommodate the commitments that have always existed, but are now reported on balance sheets.
The new standard will require some “accounting” effort, but it does provide better information for everyone. As a lender, you will more easily see your borrowers commitments under leases. On the borrower side, you will also see more clearly what your commitments of future cash flows are.
There is still plenty of time to prepare, so relax, prepare, and remember economic reality in terms of commitments/obligations and cash flows has not changed.