More Financial Executives Worried over Implementing Leases Standard
Frustration among financial reporting executives over the Financial Accounting Standards Board’s (“FASB”) new leases guidance is rising. A recent survey on Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), revealed that 29.5 percent of executives say they are unprepared to implement the standard. The percentage is up 7.1 points (22.4 percent) from the same survey conducted in January. With the leases standard going into effect next year for public companies (2020 for private companies), several factors are being contributed to implementation concerns. For instance, most companies consider collecting and tracking information on lease agreements in a financial system a large. Read More.
FASB Simplifies Provisions in Lease Standard
The Financial Accounting Standards Board (“FASB”) has asked its staff to prepare a final draft of an amendment to the board’s lease standard that would simplify how lessors account for specific property leases with recurrent service charges. At its March 28 meeting, FASB members agreed to allow lessors combine receipts from property leases and service income related to those leases by meeting certain requirements. To be accounted for as one, the lease part of the rental arrangement and the service charges need to be bound by the same transfer between the tenant and the landlord. Also, the lease contracts will. Read More.
Simplified Transition Method to FASB Lease Standard Approved
At its March 7 meeting, the Financial Accounting Standards Board (“FASB”) agreed to offer companies an easier method for transitioning to its lease standard. When adopting Accounting Standards Codification 842, Leases, companies will be able to recognize the cumulative impact of the standard as a change to the starting balance of their retained earnings. Previous guidance required companies to disclose the last two years of comparative results. Harold Schroeder was the lone FASB member to reject the streamlined transition method. Schroeder once stated that allowing companies to avoid retrospectively adopting the new standard would not clarify a company’s financial position. Read More.
GASB Article Focuses on Leases Standard
The Governmental Accounting Standards Board (“GASB”) has published an article on GASB Statement No. 87, Leases. Titled “Understanding Costs and Benefits,” the article covers the board’s assessment of the likely costs and benefits of its leases standard. The article also discusses how the GASB concluded that the expected benefits validate the costs, explains the board’s due process in approving Statement 87, and summarizes how governments should apply Statement 87. Issued in June 2017, GASB Statement No. 87 introduces a simplified approach to accounting for and disclosing leases by state and local governmental entities. The GASB based its standard on the belief that leases are. Read More.
Drug Companies Want FASB to Postpone Lease Standard
Nine pharmaceutical companies seek a one-year delay in the effective date of Accounting Standards Update No. 2016-02, Leases (Topic 842). In a letter to the Financial Accounting Standards Board (“FASB”), the companies said the new guidance for embedded lease agreements creates complications in implementing the standard before the 2019 effective date for public companies. Specifically, the pharmaceutical companies face issues with meeting the lease standard’s requirement of determining the fair value of an embedded lease contract. Drug makers regularly work with third-party manufacturers to make medicine or medicine ingredients. The contract could include an implicit asset that might be identified. Read More.
SEC Official Asks Public Companies to Focus on Key FASB Standards
Securities and Exchange Commission (“SEC”) official Michael Dusza is advising public companies to consider how the adoption of several standards from the Financial Accounting Standards Board (“FASB”) could impact their financial reporting controls. During a speech last month in Washington D.C., Dusza stressed that the accounting changes for revenue recognition, leases, and credit losses are likely to create significant challenges when public companies test internal controls during the adoption phase. Accounting Standards Update (“ASU”) No. 2014-09, Revenue From Contracts With Customers (Topic 606), is effective January 1, 2018 for public business entities. ASU No. 2016-02, Leases (Topic 842), will be. Read More.
Topics: COSO, Credit Losses, FASB, Financial Accounting Standards Board "FASB", Financial Instruments - Credit Losses (Topic 326), Internal Control Reporting, Internal Controls, lease accounting, Leases (Topic 842), Public Companies, Revenue Recognition, SEC, Securities and Exchange Commission "SEC"