CPAs and Advisors with Your Growth in Mind

General

FASB Clarifies Lease Accounting Guidance

In a follow-up to its November 30, 2016, meeting, the Financial Accounting Standards Board (“FASB”) staff responded to stakeholder feedback on Accounting Standards Update No. 2016-02, Leases (Topic 842). At its May 10 meeting, FASB staff answered questions concerning the following aspects of the new leases guidance:

  • Pipeline Laterals. The FASB affirmed that the new guidance considers a pipeline lateral as an identified asset. The FASB also advised companies to base their evaluation on a pipeline lateral on whether the customer can acquire all the economic benefits from the identified asset, and is able to instruct use of that identified asset. Staff members also agreed that no additional standard-setting action regarding pipeline laterals is necessary.
  • Easements. The FASB said that guidance exists under the Codification referring to perpetual easements as acquired intangible assets, and appreciates that guidance has led to several viewpoints on this question. Also, the FASB ordered staff members to conduct further outreach for gathering additional information on easement types.
  • Transition Period. The FASB clarified transition guidance under Topic 842. Companies must adopt the new leases standard using a modified retrospective transition approach. They can also elect a package of practical expedients and use a practical expedient regarding hindsight.

Topics: , , ,