FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
The Financial Accounting Standards Board recently issued a proposed Accounting Standards Update (ASU) to address issues arising from the adoption of Accounting Standards Codification Topic 842, Leases. If finalized, the proposed amendments would:
- For lessors, amend lease classification requirements for leases in which the lease payments are predominantly variable and not based on an index or rate by requiring lessors to classify and account for those leases as operating leases. This would mitigate the risk of lessors recognizing losses at lease commencement for sales-type leases that are expected to be profitable, resulting in financial reporting that better represents the economics underlying the lease.
- For lessees, provide the option to remeasure lease liabilities for changes in a reference index or a rate affecting future lease payments at the date that those changes take effect. The option would be required to be applied as an entity-wide accounting policy election.
- For lessees and lessors, change the requirements when there is an early termination of some (but not all) leases within a contract that does not economically affect the remaining leases in that contract. In such circumstances, entities would be exempt from applying modification accounting to the remaining leases if the economics of those remaining leases are not changed by the early terminations.
The proposed ASU, Leases (Topic 842): Targeted Improvements, is available for comment until December 4, 2020.
This article was written by RSM US LLP and originally appeared on 2020-11-02.
2020 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Insero & Co. CPAs, LLP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how Insero & Co. CPAs can assist you, please call (800) 232-9547.