FASB to Release Standard and Propose Transition Guidance on Leases
A final Accounting Standards Update (“ASU”) and a proposed standard by the Financial Accounting Standards Board (“FASB”) aim to lower costs and make it easier for preparers to implement its leases guidance.
The FASB will issue a final standard that gives organizations an optional transition practical expedient to reconsider their accounting for current land easements that are not presently accounted for in Topic Accounting Standards Codification (“ASC”) 840, Leases. The standard also affirms that once the guidance is active, new or modified land easements must be reviewed under ASC Topic 842, Leases.
Separately, FASB staffers were ordered to draft a proposed standard which would provide an option for transitioning to ASC Topic 842. This option would exempt organizations from giving comparative period financial statements, and instead, apply the transition provisions at the lease standard’s effective date. The proposal would also add a practical expedient to allow lessors not to divide non-lease components from the related lease components by meeting certain conditions. Class of underlying assets could choose this practical expedient. If elected, the disclosures would be required.