Leases: Hot Topics

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

Hot Topic: 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.
Hot Topic: ASC 842 - Accounting for rent concessions resulting from the coronavirus outbreak and Hong Kong civil unrest
Lessees are receiving rent concessions from their landlords to lessen the economic burden of temporary closures and other measures resulting from coronavirus (COVID-19) and civil unrest in Hong Kong.
Hot Topic: ASC 842 - Year 1 lease reporting reminders
This Hot Topic provides key presentation and disclosure reminders about preparing financial statements after the adoption of Topic 842.
Hot Topic: Lessor accounting for operating lease receivables
This Hot Topic addresses a series of questions about lessors’ accounting for operating lease receivables after the adoption of Topic 842.
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: Discount rates for lessees
Determining an appropriate lessee discount rate for a lease becomes more important under Topic 842. Frequently, it will be neither a straightforward exercise nor the same as under Topic 840.

Previous Leases: Hot Topics

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: Lessee 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.
Hot Topic: 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.
Hot Topic: 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.
Hot Topic: Short-term lease exemption
We explore application questions surrounding the short-term lease exemption, and whether or not to elect the exemption.



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