TSCPA News

FASB Clarifies Implementation Guidance and Disclosure Requirements in Leases Standard

March 5, 2019

The Financial Accounting Standards Board (FASB) recently issued an Accounting Standards Update (ASU) that addresses two lessor implementation issues and clarifies that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new leases standard.

The new ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied.

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

Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard.