On November 29, 2017, the FASB issued a lease accounting standard simplification update for Topic 842. The FASB’s decisions strive to reduce costs and ease the implementation burden of Topic 842 for preparers. The key highlights are as follows for the lease accounting changes.
FASB Topic 842 Leasing Standard Simplification Update:
- Add an optional transition practical expedient that, if elected, would not require an organization to reconsider their accounting for existing land easements that are not currently accounted for under Topic 840
- Clarifies that new or modified land easements should be evaluated under Topic 842.
2.Transition approach, and separation of non-lease components from lease components for lessors only
- Add an option for transition to Topic 842 that would enable an organization to not provide comparative period financial statements. Instead, an organization would apply the transition provisions of the leases standard at its effective date.
- Add a practical expedient that would permit lessors not to separate non-lease components from the related lease components if certain conditions are met. This practical expedient could be elected by class of underlying assets, and if elected, certain disclosures would be required.