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FASB Accounting Standards Updates - Accounting Standards Update No. 2023-01 — Leases (Topic 842) – Common Control Arrangements
Leases –FASB Discusses Common Control Arrangements
Related Party Arrangements –FASB Seeks Input on Proposed Improvements to Lease Guidance on Related Party Arrangements
Proposed Accounting Standards Update —Leases (Topic 842) —Common Control Arrangements
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FASB Accounting Standards Updates - Accounting Standards Update No. 2023-01 — Leases (Topic 842) – Common Control Arrangements
Summary -The FASB has issued ASU No. 2023-01, Common Control Arrangements. This ASU provides private companies and not-for-profit organizations that are not conduit bond obligors with a practical expedient to use the written terms and conditions of a common control arrangement to determine whether a lease exists and, if so, the classification of and accounting for that lease.
In addition, the ASU requires all entities (that is, including public companies) to amortize leasehold improvements associated with common control leases over the useful life to the common control group.
The amendments in this ASU are generally effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.
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© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Leases –FASB Discusses Common Control Arrangements
Summary - As discussed in its “Summary of Decisions” publication, the FASB met on February 15, 2023, and redeliberated the proposed Accounting Standards Update, Leases (Topic 842): Common Control Arrangements, and reached a number of decisions, including that for arrangements between entities under common control, the FASB affirmed its decision to provide entities within the scope of paragraph 842-10-65-1(b) (that is, entities that are not public business entities, not-for-profit bond obligors, or employee benefit plans that file or furnish financial statements with or to the U.S. Securities and Exchange Commission) with a practical expedient to use written terms and conditions for: (1) determining whether a lease exists and, if so, (2) the classification and accounting for that lease.
The FASB reached a number of other decisions which are outlined in the Summary of Decisions.
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© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Related Party Arrangements –FASB Seeks Input on Proposed Improvements to Lease Guidance on Related Party Arrangements
Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to improve accounting guidance for arrangements between entities under common control. Stakeholders are asked to review and provide comments on the proposed ASU by January 16, 2023.
During the FASB’s post-implementation review (PIR) of Accounting Standards Update No. 2016-02, Leases (Topic 842), stakeholders expressed concerns with applying Topic 842 to related party arrangements between entities under common control. Specifically, those areas are (1) which terms and conditions should be considered when determining whether a lease exists and, if so, the classification and accounting for the lease and (2) the accounting for leasehold improvements associated with leases between entities under common control.
The proposed ASU would provide private companies and not-for-profit organizations that are not conduit bond obligors with a practical expedient that would allow those entities to use the written terms and conditions of an arrangement between entities under common control to determine whether a lease exists and, if so, the classification of and accounting for that lease.
The proposed ASU also would change the accounting for leasehold improvements associated with leases for all entities (i.e., including public companies) under common control. Leasehold improvements associated with those leases would be amortized by the lessee over the economic life of the leasehold improvements as long as the lessee controls the use of the leased asset.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Proposed Accounting Standards Update —Leases (Topic 842) —Common Control Arrangements
Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to improve accounting guidance for arrangements between entities under common control. Stakeholders are asked to review and provide comments on the proposed ASU by January 16, 2023.
During the FASB’s post-implementation review (PIR) of Accounting Standards Update No. 2016-02, Leases (Topic 842), stakeholders expressed concerns with applying Topic 842 to related party arrangements between entities under common control. Specifically, those areas are (1) which terms and conditions should be considered when determining whether a lease exists and, if so, the classification and accounting for the lease and (2) the accounting for leasehold improvements associated with leases between entities under common control.
The proposed ASU would provide private companies and not-for-profit organizations that are not conduit bond obligors with a practical expedient that would allow those entities to use the written terms and conditions of an arrangement between entities under common control to determine whether a lease exists and, if so, the classification of and accounting for that lease.
The proposed ASU also would change the accounting for leasehold improvements associated with leases for all entities (i.e., including public companies) under common control. Leasehold improvements associated with those leases would be amortized by the lessee over the economic life of the leasehold improvements as long as the lessee controls the use of the leased asset.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.