Simplified Transition Method to FASB Lease Standard Approved

March 28, 2018

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 for investors. The rest of the members, however, said the approved method would help companies transition to the lease standard.