The Financial Accounting Standards Board (FASB) has issued a proposed accounting standards update (ASU) containing a number of “targeted improvements” intended to reduce costs and ease implementation of the new lease accounting standard.
Introduced in 2016, the standard brings almost all leases on balance sheet and has resulted in substantial changes for many organisations that have large numbers of leases across multiple asset types.
The proposed ASU would simplify transition requirements and, for lessors, provide a practical expedient for the separation of non-lease components from lease components.
The proposed update would simplify some of the transition requirements and offer lessors a practical expedient for separating non-lease components from lease components. The changes would add an option for transitioning to the new standard, allowing an organisation to apply the transition provisions at its adoption date, as opposed to the earliest comparative period presented in its financial statements.
Another proposed amendment would add a practical expedient that would enable lessors to avoid separating non-lease components from the associated lease components if specific conditions are met. The practical expedient could be elected by class of underlying assets. If it’s elected, certain disclosures would then be required.
“The proposed ASU is aimed at reducing unnecessary costs around implementation of the new leases standard without compromising the ultimate quality of information provided to investors,” said FASB Chairman Russell G. Golden in a 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.”
FASB is asking for comments on the proposal by 5 February 2018.