FASB issues Q&As to clarify pandemic lease accounting issues

By Ken Tysiac

FASB posted a staff Q&A document to its website Friday that is designed to clarify pandemic-related questions about lease accounting.

As a result of economic disruptions caused by the pandemic, many lessors will provide lease concessions to tenants. The Q&A states that for concessions related to the effects of the coronavirus pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract.

The entity can elect to apply or not apply the lease modification guidance in FASB Accounting Standards Codification Topic 842, Leases, or Topic 840, Leases, to those contracts, according to the Q&A.

The Q&A also answers:

  • Whether an entity has to account for all lease concessions related to the effects of the pandemic either (a) as if the enforceable rights and obligations to those concessions existed in the original contract or (b) in accordance with the lease modification guidance in Topic 842 and Topic 840.
  • Whether an entity should provide disclosures about lease concessions related to the effects of the pandemic.

FASB plans to continue monitoring this area to determine whether additional clarification is necessary in the future.

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

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