FASB plans to ease lease accounting requirements

By Michael Cohn, AccountingToday.com

The Financial Accounting Standards Board decided during a meeting Wednesday to ease some of the implementation burdens and possible costs of the new lease accounting standard by making several adjustments and offering some practical expedients.

In the area of land easements, FASB decided to proceed with issuing a final accounting standards update that offers a more practical expedient as an optional transition to the new standard. If elected, the option wouldn’t require an organization to reconsider its accounting for existing land easements that aren’t currently accounted for under the proposed leasing standard known as Topic 840 in FASB’s Accounting Standard Codification. FASB is also clarifying that new or modified land easements should be evaluated under Topic 842 (the final standard for leases), once it becomes effective.

FASB is also providing a transition approach, and separation of nonlease components from lease components for lessors only. The board asked the FASB staff to draft a proposed accounting standards update, with a comment period of 30 days, that would add an option for transition to Topic 842 that would enable an organization to not provide comparative period financial statements. Instead, an organization would apply the transition provisions of the leases standard at its effective date.

The new ASU would also add a practical expedient that would allow lessors not to separate nonlease components from the related lease components if certain conditions are met. The practical expedient could be elected by class of underlying assets. If elected, certain disclosures would be required, however.

FASB plans to provide a summary of the board’s tentative decisions from Wednesday’s meeting on its website within the next week.