On The Horizon: FASB proposes changes to leasing standard

Contents FASB proposes amendments to new leasing standard AICPA       ASEC issues fixed-asset subledger audit data standard

Comment letter issued

FASB proposes amendments to new leasing standard The FASB has issued a proposed ASU, Leases (Topic 842): Targeted Improvements, to provide entities with an additional transition method when applying ASC 842, Leases, and to provide lessors with a practical expedient when separating nonlease components from lease components under the new leasing guidance. The Board issued the proposal in response to stakeholder inquiries about the following requirements of the new lease guidance:

  • Comparative reporting upon initial adoption
  • Separating lease and nonlease components in a contract and allocating consideration to separate components

Under the proposed amendments, entities could elect to apply the transition requirements in ASC 842 on its effective date instead of at the beginning of the earliest period presented.

In addition, lessors could elect to use a practical expedient, by class of underlying asset, to account for nonlease components with the related lease components as a combined single lease component, instead of separating the nonlease components from the lease components, if both of the following conditions are met:

  • The timing and pattern of revenue recognition for the nonlease component(s) and the related lease component are the same.
  • The combined single lease component is classified as an operating lease.

A lessor that elects to apply the practical expedient would be required to disclose this election, as well as the class or classes of underlying assets to which the expedient applies and the nature of the nonlease components included within the single lease component.

The effective date and transition requirements for the proposed amendments would be the same as those for ASC 842.

Comments on the proposal are due February 5.

AICPA ASEC issues fixed-asset subledger audit data standard The Emerging Assurance Technologies Task Force of the AICPA’s Assurance Services Executive Committee (ASEC) issued Audit Data Standard – Fixed Asset Subledger Standard. The standard is intended to assist in standardizing the fields and files associated with the fixed-asset account. The new guidance will also facilitate basic analysis of the fixed-asset process performed as part of an audit, as well as analysis that may be performed by company staff and internal audit in order to improve internal processes.

Comment letter issued On January 5, the firm issued a comment letter in response to the SEC’s proposed rule, FAST Act Modernization and Simplification of Regulation S-K.

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