FASB proposal would address lessor implementation challenges

By Ken Tysiac

FASB issued a proposal Wednesday that would address challenges that lessors may encounter as they implement the board’s new lease accounting standard.

The proposed Accounting Standards Update would align the guidance for fair value of the underlying asset with existing guidance for lessors that are not manufacturers or dealers in FASB ASC Topic 842, Leases. As a result, the fair value of the underlying asset at lease commencement would be its cost, reflecting any volume or trade discounts that may apply.

However, if there has been a significant lapse of time between the acquisition of the underlying asset and the commencement of the lease, the definition of fair value in Topic 820, Fair Value Measurement, would be applied under the proposal.

The proposal also would require lessors within the scope of Topic 942, Financial Services — Depository and Lending, to present all “principal payments received under leases” within investing activities.

Comments on the proposal can be submitted through Jan. 15 on FASB’s website.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.

SPONSORED REPORT

Getting leases in line

ASC Topic 842 is a relatively simple standard that can mean profound changes for organizations with leases. This report examines what makes this standard challenging and describes new ways for CPAs to add value.