FASB ASC 842 - Comparative Years No Longer Necessary for Lessees
By Mike Hammerslag
The Financial Accounting Standards Board (FASB) has affirmed a new method of transition that eliminates the need for companies to provide comparative financial statements under ASC 842 for the prior two (2) years (i.e., 2017 and 2018). Instead, firms should present (continue to maintain) their disclosure for these years under ASC 840.
The second area of relief that was included with the item above, both presented under the request Leases – targeted improvements to Topic 842, was related to the separation and allocation practical expedient for lessors; which was not discussed in the March 7, 2018 meeting.
Because the second area was not discussed, the final Update for Leases – targeted improvements to Topic 842, encompassing both items, will not be available until after the required further discussions on the lessor issue.
However, we believe the affirmation of the new transition method for lessees can now be considered actionable.
The new transition option will eliminate the need to write what would have been a broad set of processes, procedures, and internal controls around the messy series of decisions that would have to have been addressed on leases starting, stopping, or being modified in the comparative years.
This new relief makes the reporting leading up to adoption much simpler with regards to the aforementioned “rules” which will now be more singularly focused on firms’ adoption date for ASC 842 and events subsequent.
About the Author
Mike Hammerslag, MSRE, MBA, CPM, MCR, began his real estate career in 1988 when he joined The Rockefeller Group, Inc., and has never left the industry. Mike’s career has allowed his involvement in nearly every aspect of real estate – from research, strategy, and leasing to management and ownership. Overall, he brings an unparalleled view of strategic real estate management and financial oversight as Senior Product Manager and our resident FASB/IASB expert.