New Developments Summary: Leases in transition

New leasing standard provides detailed transition guidance

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Implementing the FASB’s new accounting guidance, ASC 842 Leases, promises to be a complex process, particularly in calculating, recording and disclosing the adjustments needed to switch from the legacy lease accounting guidance codified in ASC 840.

For this ASC 840 to ASC 842 transition, the FASB designed transition guidance to assist financial statement preparers, including some practical expedients such as allowing businesses to forgo reassessing conclusions reached under legacy GAAP for existing leases. However, even with this transition guidance, Grant Thornton believes businesses could still find implementing ASC 842 a challenging task, particularly given the changes in lessees’ accounting for operating leases.

This New Developments Summary examines the transition guidance in ASC 842 in detail, expressing the firm’s evaluation of implementation questions already raised by practitioners. As the ASU codifying the alternative transition method is not yet final, this article is based on the proposed ASU and is subject to change when the final ASU is issued.