FASB Proposes Improved Lease Accounting Transition Reliefs
The Financial Accounting Standards Board (FASB) recently (5th January 2018) issued a proposed accounting standards update intended to reduce the costs for preparers implementing the new standard.
The proposed improvements intend on simplifying certain aspects of the transition requirements and offers lessors a practical expedient for the separation of non-lease components from lease components.
Under the proposed amendments, the following changes would be made:
- Add an option for transition to ASU No. 2016-02, Leases (Topic 842), that would permit an organisation to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements.
- Add a practical expedient that would permit lessors to not separate nonlease components from the associated lease components if certain conditions are met. This practical expedient could be elected by class of underlying assets; if elected, certain disclosures would be required.
“The proposed ASU (Accounting Standard Update) is aimed at reducing unnecessary costs around implementation of the new leases standard without compromising the ultimate quality of information provided to investors,” stated Russell Golden, FASB Chairman in a recent statement. “It’s part of our ongoing effort to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard.”
The US accounting board, FASB, is encouraging comments on the proposed improvements by 5th February 2018.
Want To Know More About Lease Accounting
To find out more about the new lease accounting standard: Follow the link to access a short FASB ASC 842 overview and fact sheet.