Defining Issues | November 2017


FASB agrees to further amend the leases standard

KPMG reports on decisions made at the November 29, 2017 FASB meeting. The Board decided to finalize its proposed ASU on land easements, and propose practical expedients on transition and the accounting for lease and non-lease components by lessors.


Applying the new leases standard

Land easements

  • Companies with land easements, particularly in the energy, utilities, transportation and telecom industries

Optional transition relief

  • All companies within the scope of the new leases standard

Separation of lease and non-lease components by lessors

  • Lessors with contracts that contain lease and non-lease components (e.g. common area and other forms of maintenance services, operational services)

Key impacts

  • Land easements. A final ASU will be issued clarifying that land easements are in the scope of the new leases standard. In addition, companies will not be required to assess whether land easements that commence before the effective date of the new standard are or contain leases if those easements were not previously accounted for as leases under current US GAAP.
  • Transition. The Board decided to propose an amendment permitting a cumulative effect transition option. Companies that elect this option would not have to adjust their comparative period financial statements (e.g. 2017 and 2018 financial statements for a public company) for effects of the new standard, or make the new required lease disclosures for periods before the effective date.
  • Lease and non-lease components for lessors. The Board’s decision on lease and non-lease components would permit lessors (who meet specific requirements), as an accounting policy election by class of underlying asset, to not separate non-lease components of a contract from the lease component to which they relate.

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