New Tool to Help with Implementing FASB Leases Standard
The Center for Audit Quality (“CAQ”) has designed a tool to support audit committees in their implementation of Accounting Standard Codification Topic 842, Leases, by the Financial Accounting Standards Board (“FASB”). Preparing for the Leases Accounting Standard: A Tool for Audit Committees includes a synopsis of Topic 842 and the standard’s requirements. The new tool also lists which questions audit committee members should consider for a successful application. Topic 842, Leases, will be effective in January 2019. A recent poll, however, found that only 21 percent of professionals say their organizations are either “extremely” or “very” prepared to implement the new leases standard.
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 to Lease Standard Offered for Land Easements
Thanks to the Financial Accounting Standards Board’s (“FASB”) latest Accounting Standards Update (“ASU”), companies with land easements contracts should have an easier time applying the board’s lease standard. ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, offers a simplified transition to ASU No. 2016-02, Leases (Topic 842), for businesses with the right to use another entity’s land for purposes such as running pipelines or burying transmission wires. The amendments ensure that businesses can successfully transition to ASU No. 2016-02 without impacting the information investors receive about land easements. The FASB addresses the issue. 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"
Data Collection Stifling Companies’ Lease Implementation Efforts
Officials from Avis Budget Group Inc. and General Dynamics Mission Systems say collecting data during the implementation process for the Financial Accounting Standards Board’s (“FASB”) leases standard has slowed compliance efforts. At a December 6 conference in Washington, D.C., company officials described their adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), as being more intensive than expected. The FASB issued the standard to simplify lease accounting for companies. However, since corporations lease a wide range of items, the assets could produce a massive amount of data to gather and review. Adena Lerner of General Dynamics Missions Systems, for. Read More.