Last Week (2/15/23), The Financial Accounting Standards Board (FASB) approved an Accounting Standards Update (ASU) addressing implementation concerns related to common control leasing arrangements. While the ASU will not eliminate the requirement for private companies to implement Topic 842 (ASC 842) as many in the industry had hoped, it does provide relief that is expected to simplify lease analysis and reduce implementation costs by allowing private companies to make an election to rely upon the written terms of the lease agreements.
The ASU also addresses a potential problem related to the useful lives of leasehold improvements. Topic 842 requires leasehold improvements to be amortized over the shorter of the asset’s useful life or the term of the lease, which can create undesirable results for leasehold improvements attributable to shorter term leases.
The ASU is expected to be issued by the end of March (2023) and will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years; however, early adoption will be permitted even for those who have not yet adopted the ASC 842 standard.
CSH will provide a complete overview of the ASU when released by FASB along with recommendations for accurate implementation. In the meantime, please reach out to the experts in our Lease Accounting Group with any questions related to the Financial Accounting Standards Board’s forthcoming ASU for lease accounting or with questions related to ASC 842 transition.