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Companies Seek More Guidance on Adopting FASB Leases Standard

Before the year ends, the Financial Accounting Standards Board (“FASB”) intends to take another look at Accounting Standards Update No. 2016-02, Leases (Topic 842). According to FASB Chairman Russell Golden, the board will likely consider revising the method companies must use when transitioning to the new leases standard, how landlords determine common area maintenance charges in rent payments, and updates to disclosures regarding leases in foreign currency and short-term lease expense.

The standard, which requires balance sheet disclosures regarding a company’s assets and liabilities related to rented property and equipment, has raised questions concerning whether companies are prepared to implement the new guidance. Several companies have been unable to find software to help them meet the standard’s recognition and measurement requirements and its disclosure rules.

In a comment letter to the FASB, Financial Executives International (“FEI”) said the lack of commercially available software is heightened for companies with over one thousand nonstandard, multicurrency real estate and equipment leases. The group had considered asking for a delay in the standard’s effective date, but changed its mind after realizing the FASB would likely decline its request. Instead, to help alleviate implementation issues, FEI wants some lease contracts to be exempt from the standard, retroactive transition to be optional, and several disclosure requirements to be eliminated.

Others have also sought amendments to the standard. Last month, several office real estate investment trusts asked the FASB for clarity on reporting maintenance fees from tenants.

Public companies must adopt the leases standard in 2019.

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