Comment: leasing for common control entities


Grant Thornton issued a comment letter responding to the FASB’s proposed ASU, Leases (Topic 842): Common Control Arrangements, which primarily features two issues related to accounting for leases between entities under common control.


In our letter, we generally agree with the first issue, which would allow private companies to account for leases under common control using the written terms of the arrangement rather than the legally enforceable terms and conditions. This amendment was proposed because an evaluation of “legal enforceability,” as required for leases between related parties, is often challenging to determine between entities under common control.


The second issue would require entities to amortize leasehold improvements under leases between both public and private entities under common control over the improvements’ economic lives rather than over the shorter of their useful lives or the lease term. However, we believe that this proposal should apply only to private companies, since public companies have been applying the existing guidance for some time and, in our experience, generally have not encountered any difficulties in implementation. We also note that the use of the asset’s economic life, rather than the useful life that is required in accounting for property, plant, and equipment, could trigger unintended outcomes in several areas, such as impairment and accounting for the improvements after the lease has ended.


Download our letter to read our comments in full. 


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