FASB is seeking comments on a proposed Accounting Standards Update (ASU) intended to improve accounting guidance for arrangements between entities under common control.
FASB said that during its post-implementation review of ASU No. 2016-02, Leases (Topic 842), stakeholders expressed concerns with applying Topic 842 to related-party arrangements between entities under common control. Those concerns related to the terms and conditions that should be considered when determining whether a lease exists and, if so, the classification and accounting for the lease; and the accounting for leasehold improvements associated with leases between entities under common control.
The update, according to FASB, would provide private companies and not-for-profit organizations that are not conduit bond obligors with a practical expedient that would allow those entities to use the written terms and conditions of an arrangement between entities under common control to determine whether a lease exists and, if so, the classification of and accounting for that lease.
The proposed ASU, FASB said, would change the accounting for leasehold improvements associated with leases for all entities under common control. Leasehold improvements associated with those leases would be amortized by the lessee over the economic life of the leasehold improvements as long as the lessee controls the use of the leased asset.
Comments on the proposed ASU will be accepted through Jan. 16. Comments can be sent by email to email@example.com.
— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.