FASAB releases transitional accommodations for new leases standard

The Federal Accounting Standards Advisory Board (FASAB) issued an amendment aimed at assisting entities with the transition to new reporting requirements related to leases.

Statement of Federal Financial Accounting Standards (SFFAS) 62, Transitional Amendment to SFFAS 54, offers some new options related to SFFAS 54, Leases, which became effective for reporting periods beginning after Sept. 30.

“These transitional accommodations are meant to provide an appropriate degree of flexibility and allow reporting entities to manageably implement SFFAS 54 requirements for eligible contracts and agreements on a transitional basis,” FASAB Chair George A. Scott said in a news release.

Under the amendments, reporting entities may elect not to assess whether contracts or agreements meeting the specific eligibility criteria for “embedded leases” are or contain lease component(s) as of Oct. 1, 2023, as well as those subsequently entered into or modified prior to the end of the accommodation period. The contracts or agreements for which this accommodation is applied would be accounted for as nonlease contracts or agreements for their remaining term, unless they are subsequently modified after the end of the accommodation period.

Reporting entities electing the accommodation are required to prospectively apply the provisions of SFFAS 54, Leases, to lease components of new or modified contracts or agreements meeting the eligibility criteria — depending on the end of the elected accommodation period selected — beginning Oct. 1, 2023; Oct. 1, 2024; or Oct. 1, 2025.

Leases that do not meet the “embedded leases” eligibility criteria — and those for which the accommodation is not elected — should continue to follow the implementation provisions of paragraphs 96-97 of SFFAS 54. The transitional amendments also require disclosure for reporting entities electing the accommodation, the news release said.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.