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ASU 2018-11

08/06/2018  |  By: Buck Freeman, CPA, Senior Manager, Audit

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On July 30, 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2018-11 Leases – Targeted Improvements (“ASU 2018-11”). The most significant impact of ASU 2018-11 is relief in the comparative reporting requirements for initial adoption. Under ASU 2018-11, adopters will take a prospective approach, rather than a retrospective approach as initially prescribed, when transitioning to ASU 2016-02. Instead of recording the cumulative impact of all comparative reporting periods presented within retained earnings, adopters will now assess the facts and circumstances of all leasing contracts as of January 1, 2019 (for public companies with calendar year-end reporting dates) and January 1, 2020 (for non-public companies with calendar year-end reporting dates). We believe this revised transition guidance will vastly reduce the lease inventory as any leases expiring before the transition date can be disregarded. Any renewals of expiring leases should be considered as part of this adoption.

For lessors, ASU 2018-11 adds an optional practical expedient permitting lessors, under certain circumstances, not to separate the lease and non-lease components by class of underlying assets, but rather to account for them as a single combined component, and further clarifies the accounting treatment for such a combined component. Read the full ASU

Posted in: Audit