Accounting & Auditing

FASB to consider ‘status of, and issues arising from’ leases standard


The Financial Accounting Standards Board is slated to discuss the "status of, and issues arising from," its standard on accounting for leases (Topic 842), issued earlier this year.

The leases standard is expected to add trillions of dollars of off-balance-sheet leases onto the balance sheets of lessees (per Moody's and The Wall Street Journal).

'Status' and effective date The leases standard  carries the following effective date (per FASB).

For public companies, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018. Thus, for a calendar-year company, it would be effective Jan. 1, 2019. A public company is any organization that is any one of the following:

  • A public business organization.
  • A not-for-profit organization 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.
  • An employee benefit plan that files or furnishes financial statements to the SEC.

For all other organizations, the ASU is effective for fiscal years beginning after Dec. 15, 2019 and for interim periods within fiscal years beginning after Dec. 15, 2020.

Early application will be permitted for all organizations.

An important consideration is that companies will be working to develop comparable information for prior periods and need time to test their accounting systems and internal controls, and to finalize any necessary changes in contracts or other operational changes prior to 2019 (for public companies) and 2020 (for private companies, not-for-profit organizations and other nonpublic entities).

Preparers, auditors, and audit committees are not only engaged in implementing the new leases standard, but also new standards on revenue recognition and credit losses.

Presumably the reference in the Nov. 30  Notice of Open Meetings to FASB's plan to consider the "status of, and issues arising from" the leases standard means that FASB will discuss, based on its outreach to constituents and questions coming into its technical hotline, the status of implementation of the standard and requests for guidance. There is no mention in the notice of any potential consideration of a deferral of the effective date of the standard as part of the discussion of the 'status' of the standard and related issues; the full scope of what FASB intends to consider is something we will find out when FASB meets tomorrow (and, in advance of that meeting, when the Board Handout is posted).

Implementation guidance In the meantime, FASB has issued what some have referred to as 'informal feedback'  or 'insights' on the Leases standard. (See: FASB offers views on lease accounting questions, by Tammy Whitehouse in ComplianceWeek, and FASB offers insight on three lease accounting trends by Terry Sheridan in AccountingWEB). These articles refer to "Implementing the Leases Standard: A Few Things to Consider," authored by FASB Assistant Project Manager  Lisa Kaestle, posted as part of the most recent quarterly FASB Outlook.

"Eight months have passed since we issued our leases standard and during this time the FASB has been proactively working with stakeholders to discuss specific aspects of the standard where questions arose," states FASB's Kaestle.

"The FASB staff have received technical inquiries that have primarily focused on the following areas of guidance," says Kaestle:

  • Definition of a lease
  • Lessee accounting
  • Lessor accounting
  • Discount rate
  • Transition

Although some trends are discussed by Kaestle regarding the five areas above, it will be interesting to see if, at tomorrow's FASB board meeting, the board decides to publish any more formal (or informal) implementation guidance or examples.

The FASB and other standard-setters have moved away from providing detailed implementation guidance as part of their effort to promote 'principles-based' standards. (In other words, to avoid what happened with, say, Derivatives accounting decades ago, when the FASB developed hundreds of pages of implementation guidance developed by its Derivatives Implementation Group.

At the same time, the SEC, as part of its oversight role, generally likes to see that preparers and auditors have enough information and guidance within accounting standards to be able to understand and implement the standard in a consistent manner.

Whether FASB will gather and share more detailed examples of some of the responses it has given on particular questions coming into its technical hotline on the leases standard, or leave the development of any necessary implementation guidance to, e.g. constituent groups representing preparers or auditors remains to be seen. It will be interesting to see what is decided at tomorrow's board meeting.

Goodwill, non-employee share-based payments also to be addressed Other topics slated for discussion at FASB's board meeting tomorrow include external reviewer comments on a draft of the proposed standard on non-employee share-based payment transactions, and external reviewer comments on a draft of a final standard on simplifying accounting for goodwill. The conceptual framework-measurement project will also be discussed, as well as consideration of ratifying several recent consensuses of FASB's Emerging Issues Task Force.

An update on FASB activities will be provided by FASB Chair Russell Golden at the AICPA National Conference on Current SEC and PCAOB Developments, taking place Dec. 5-7 in Washington, D.C., with simulcast available.

For additional updates on current accounting and auditing topics, including live and online events, see the MACPA's CPE catalog and featured events.


Edith Orenstein