Changes and proposed changes to FASB’s new lease accounting standard that were announced last week addressed financial statement preparers’ most pressing implementation concerns, FASB Chairman Russell Golden said Tuesday.
With those concerns addressed, Golden said he does not expect a delay in the standard’s effective date, which is 2019 for public companies and the following year for private companies.
The board’s attention to lease accounting challenges was part of FASB’s current focus on helping preparers implement a suite of high-profile standards and helping preparers and auditors reduce cost while providing investors with better information.
New standards on revenue recognition, lease accounting, credit losses, and hedging have caused preparers to devote a lot of resources to implementation in recent years.
“Over the past few years, the FASB has thrown a lot of change your way,” Golden told the audience Tuesday at the AICPA Conference on Current SEC and PCAOB Developments. “We know that. We are working to ease the transition of that change by supporting your implementation.”
Last week’s FASB actions on lease accounting were designed to:
- Provide an optional practical expedient for transition that, if elected, would exempt organizations from the requirement to consider their accounting for existing land easements that are not currently accounted for under FASB ASC Topic 840.
- Clarify that new or modified land easements should be evaluated under the new leases standard once effective.
FASB also voted to issue a proposed Accounting Standards Update that would add an option for transition to the leases standard that would enable an organization to not provide comparative period financial statements.
The proposal also would add a practical expedient that would permit lessors not to separate nonlease components from the related lease components if certain conditions are met.
Golden said the proposed election to no longer require retrospective accounting was a response to companies’ concerns that they would need to make systems changes to collect the data.
“We believe these changes will help ensure a timely adoption of our leases standard,” Golden said. “These are good examples of the importance of continuously engaging with stakeholders, even after a final standard has been issued.”
FASB’s priorities for 2018 include:
- Continuing to assist preparers in their implementation efforts.
- Completing a project that is designed to improve accounting for long-duration insurance contracts.
- Completing work on the board’s disclosure framework project.
- Making further progress on simplifying GAAP and its conceptual framework project.
The board also is moving forward with longer-term efforts to improve accounting for liabilities and equity; consider disaggregation of performance reporting by function and nature; and address narrow-scope issues in segment reporting. Golden explained that possible standards and implementation dates for those projects would be far in the future.
In this time of change, Golden understands that preparers already have plenty of implementation work to do.
“Part of our job is positioning organizations like yours for a successful and smooth transition to new standards,” Golden told the audience. “And that means making hard but necessary choices. We’re striving to manage the pace of change by managing it at the beginning of the process, not the end.”
—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.