Memorial Hospital and Changes Related to Accounting for Leases

Memorial Hospital was part of a successful, for-profit, integrated healthcare organization. The hospital relied upon leases to finance equipment and real property. Pat Carter, chief executive officer, recently hired a new chief financial officer, Carla Johnson, to oversee the hospital’s finances. During a meeting, Carla informed Pat of a newly adopted accounting standard that altered the financial reporting requirements for leases. Pat asked Carla to evaluate the new standard, Number 2016-02 Leases (Topic 842), adopted by the Financial Accounting Standards Board (FASB), to see what effects the change might have on the hospital’s reporting requirements. Pat also wanted to know if there were any actions the organization could take in order to minimize the overall impact of the newly adopted standard.