Insight

Leases: Hot Topics

These focused Hot Topics are intended for practitioners with an interest in the detailed application of ASC 842.

Hot Topic: Leases - Topic 842 transition complexities from recent economic conditions
This Hot Topic compiles specific Questions on select Topic 842 implementation issues from KPMG Handbook, Leases, into one concise document to assist entities in their initial application of Topic 842.
Hot Topic: Leases - Enhanced focus on lessee discount rates
Key considerations for public and private entity lessees when determining the discount rates for leases.
Hot Topic: ASC 842 - Understanding the short-term lease exemption
Key considerations for lessees when determining whether to elect – and how to apply – the short-term lease exemption.
Fair Market Rent Adjustments
Fair market rent is an index; therefore, lease payments based on fair market rent are variable lease payments that depend on an index or rate.
Coronavirus - FASB staff guidance on accounting for COVID-19
The FASB staff has issued guidance that permits a simplified approach to accounting for COVID-19 related rent concessions – for lessees and lessors. KPMG answers questions about the application of this optional staff guidance.
Coronavirus - Lease accounting impacts of COVID-19
The economic and financial markets effects of the COVID-19 pandemic may have a number of impacts on companies’ lease accounting under ASC 842. This article follows our recent Hot Topic on accounting for rent concessions resulting from the COVID-19 outbreak.
Hot Topic: Coronavirus and civil unrest impact on lease accounting
Applying ASC 842 to rent concessions arising from coronavirus and Hong Kong civil unrest related property closures.

Previous Leases: Hot Topics

Hot Topic: Lessor accounting for a supply agreement
Suppliers (lessors) providing ‘free’ use of their equipment to facilitate sales of goods generally will need to allocate a portion of the consideration for goods sales to the ‘free’ lease.
Hot Topic: Embedded leases
Embedded leases in existing contracts may not have been identified; companies need to look critically at their current lease population as part of their adoption of Topic 842.
Hot Topic: Fair market rent adjustments
Fair market rent is an index; therefore, lease payments based on fair market rent are variable lease payments that depend on an index or rate.
Hot Topic: Lease accounting for variable payments
Allocating variable lease payments to lease and non-lease components may be an unexpected challenge for many lessees.
Hot Topic: Minimum rental payments
New lease liabilities and ROU assets recognized in transition include the fixed payments required for all periods that are part of the ‘lease term’, which includes reasonably assured renewal periods.
Penalties and Termination Rights
Beware of the broad concept of a penalty under Topic 842 when considering the effect of termination rights on the lease term.
Recognition of Threshold for Leases
Companies should consider a number of factors before deciding whether to establish a lease recognition threshold and, if so, at what amount.

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