FASB Issues Proposed Changes to Lease Accounting Standard
A recently proposed update to the Financial Accounting Standards Board’s (“FASB”) lease accounting standard aims to alleviate the work lessors will have to perform when applying Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). Proposed ASU No. 2018-260, Leases (Topic 842): Narrow-Scope Improvements for Lessors, offers lessors new guidance on the breakout of sales and other similar taxes from their costs, and the recognition of certain expenses and variable payments for lease and non-lease portions of a contract. Landlords and companies that lease equipment to their customers informed the FASB that the amount of work and analysis required by ASU No.. Read More.
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.
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.