FASB issued the Accounting Standards Update (ASU) No. 2019-01 on the standard for leases (topic 842). The ASU addresses two lessor implementation issues and clarifies that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new leases standard.
The new ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842, with that of the existing guidance. Consequently, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. This ASU also requires lessors within the scope of Topic 942 (Financial Services—Depository and Lending) to present all “principal payments received under leases” within investing activities. The new ASU clarifies areas identified by FASB's stakeholders as they prepared to implement the leases standard.
FASB had issued the ASU No. 2016-02 on Leases (Topic 842) on February 25, 2016. The aim of this standard is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing essential information about leasing transactions. However, FASB decided to issue a separate Update (ASU No. 2019-01) for the improvements related to ASU 2016-02 to increase stakeholder awareness of the amendments and to expedite the improvements. The amendments in ASU No. 2019-01 include the following items brought to the Board’s attention through its interactions with stakeholders:
- Determining the fair value of the underlying asset by lessors that are not manufacturers or dealers (Issue 1)
- Presentation on the statement of cash flows—sales-type and direct financing leases (Issue 2)
- Transition disclosures related to Topic 250, Accounting Changes and Error Corrections (Issue 3)
The amendments in ASU No. 2019-01 amend Topic 842, which has different effective dates for public business entities and entities other than public business entities. The effective date of those amendments is for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years for any of these entites: a public business entity; a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market; and an employee benefit plan that files financial statements with the U.S. SEC. For all other entities, the effective date is for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted. An entity should apply the amendments as of the date that it first applied Topic 842, using the same transition methodology in accordance with paragraph 842-10-65-1(c).
Keywords: Americas, US, Banking, Accounting, Accounting Standards Update, Leases Standard, ASU 2019-01, ASU 2016-02, IFRS 16, FASB
Previous ArticlePRA Issues PS7/19 Related to Definition of Default Under Credit Risk
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore.
ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.
SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.
BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.
ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.
MAS revised multiple notices that are applicable to banks and merchant banks in Singapore and have been issued pursuant to the Banking Act (Cap 19).
EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.
BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.
EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.