THE FU­TURE OF THE AU­DIT

In the inau­gu­ral en­try of this new col­umn, Mervyn King ex­plores as­sur­ance’s evo­lu­tion

Accounting Today - - Front Page -

FASB tweaks leas­ing stan­dard

Nor­walk, Con­necti­cut — The Fi­nan­cial Ac­count­ing Stan­dards Board re­leased a set of mostly mi­nor re­vi­sions and tech­ni­cal cor­rec­tions to the lease ac­count­ing stan­dard.

The Cod­i­fi­ca­tion Im­prove­ment to Topic 842, “Leases,” af­fects only nar­row as­pects of the pre­vi­ous guid­ance. FASB didn’t cre­ate a Tran­si­tion Re­source Group on the leas­ing stan­dard, as it did with the rev­enue recog­ni­tion and credit loss stan­dards. But FASB and its staff have been help­ing stake­hold­ers dur­ing the tran­si­tion pe­riod un­til the stan­dard takes ef­fect in De­cem­ber for pub­lic com­pa­nies re­spond­ing to in­quiries and elic­it­ing feed­back on po­ten­tial im­ple­men­ta­tion is­sues that could arise. The doc­u­ment ad­dresses a num­ber of those is­sues.

The lease ac­count­ing stan­dard will put op­er­at­ing leases on the bal­ance sheet of many com­pa­nies for the first time ever, and there are some dif­fer­ences be­tween FASB’S ver­sion of the stan­dard for U.S. GAAP and the In­ter­na­tional Ac­count­ing Stan­dards Board’s ver­sion for In­ter­na­tional Fi­nan­cial Re­port­ing Stan­dards.

The doc­u­ment lists a num­ber of ar­eas where im­prove­ments have now been made in the FASB stan­dard, such as resid­ual value guar­an­tees, where a cross-ref­er­ence has been cor­rected, and lessee re­assess­ment of lease clar­i­fi­ca­tion. There the amend­ment clar­i­fies that a rate im­plicit in the lease of zero should be used when ap­ply­ing the def­i­ni­tion of the term “rate im­plicit in the lease” re­sults in a rate that is less than zero. An­other amend­ment con­sol­i­dates the re­quire­ments about lease clas­si­fi­ca­tion re­assess­ments into a sin­gle para­graph and de­scribes how an en­tity should per­form the lease clas­si­fi­ca­tion re­assess­ment, on the ba­sis of the facts and cir­cum­stances, and the mod­i­fied terms and con­di­tions, if ap­pli­ca­ble, as of the date the re­assess­ment is re­quired.

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