Leases

POST-ISSUANCE ACTIVITIES AND AMENDMENTS TO ACCOUNTING STANDARDS UPDATE NO. 2016-02, LEASES (TOPIC 842)

 

Overview


On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. Read Update 2016-02 at the links below:
  • Section A—Leases: Amendments to the FASB Accounting Standards Codification®
  • Section B—Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification®
  • Section C—Background Information and Basis for Conclusions
Unlike other recently issued, significant Updates (such as revenue recognition and credit losses), the FASB did not create a Transition Resource Group (TRG) for the new leases guidance. This is primarily because many of the concepts used in Topic 842 are similar to those used in Topic 840. However, while a formal TRG was not created, the Board and the staff have assisted stakeholders during this transitional period by responding to inquiries received and proactively seeking feedback, whenever possible.
 

Post-Issuance and Standard-Setting Activities


Since the issuance of Update 2016-02, the Board has discussed implementation of Topic 842 at the following Board meetings: The objective of the Board’s standard-setting activities related to Topic 842, Leases, has been to address stakeholders’ concerns and ensure a smooth transition to the new Topic.
 
The amendments in the following Updates clarify or affect certain aspects of Topic 842 but do not change the core principle of the guidance in Topic 842.

Land Easements
 
On January 25, 2018, the Board issued Accounting Standards Update No. 2018-01, Leases (Topic 842)—Land Easement Practical Expedient for Transition to Topic 842. Codification Improvements
 
On July 18, 2018, the Board issued Accounting Standards Update 2018-10,  Codification Improvements to Topic 842, Leases. Targeted Improvements

On July 30, 2018 the Board issued Accounting Standards Update 2018-11, Leases (Topic 842)—Targeted Improvements Lessor Narrow-Scope Improvements
 
On December 10, 2018, the Board issued Accounting Standards Update No. 2018-20, Leases (Topic 842): Narrow Scope Improvements for Lessors. Codification Improvements
 
On March 5, 2019, the Board issued Accounting Standards Update No. 2019-01, Leases (Topic 842): Codification Improvements.

Effective Dates


The amendments in Accounting Standards Update Nos. 2018-01, 2018-10, 2018-11, and 2018-20 affect the guidance in Accounting Standards Update No. 2016-02, Leases (Topic 842), which was not effective when Updates 2018-01, 2018-10, 2018-11, and 2018-20 were issued. However, Topic 842 may have been early adopted. The amendments in Update 2018-01 also affect Example 10 of Subtopic 350-30, Intangibles—Goodwill and Other—General Intangibles Other Than Goodwill.
 
For Entities that had Not Yet Adopted Update 2016-02
 
For entities that had not adopted Update 2016-02 before the issuance of Updates 2018-01, 2018-10, 2018-11, and 2018-20, the effective date and transition requirements for the amendments in these updates are the same as the effective date and transition requirements in Update 2016-02..
 
For Entities that had Already Adopted Update 2016-02
 
For entities that early adopted Topic 842 before the issuance of Update 2018-01 or Update 2018-10, the amendments are effective upon issuance, and the transition requirements are the same as those in Topic 842..
 
For entities that had adopted Topic 842 before the issuance of Update 2018-11, the transition and effective date of the amendments related to separating components of a contract are as follows:
  1. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity.
  2. The practical expedient may be applied either retrospectively or prospectively.
All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this Update must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected.

For an entity that had adopted Topic 842 before the issuance of Update 2018-20, the transition and effective date of the amendments are as follows:
  1. The amendments should be applied to all new and existing leases either at the original effective date of Topic 842 for the entity, in the first reporting period ending after the issuance of this Update, or in the first reporting period beginning after the issuance of this Update.
  2. The amendments may be applied either retrospectively or prospectively.

What Entities Are Affected by the New Guidance in the Updates?


The amendments in these Updates affect entities with transactions included within the scope of Topic 842. The scope of that Topic includes entities that enter into contracts meeting the definition of a lease. The amendments in Update 2018-01 also affect guidance within the scope of Subtopic 350-30.


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