Defining Issues | March 2019

FASB issues ASU changing lessor accounting

KPMG reports on ASU 2019-01. The FASB released ASU 2019-01, which makes targeted amendments to 1) reinstate certain fair value guidance from ASC 840 for some lessors, 2) revise how financial institution lessors should classify lessee payments in the statement of cash flows, and 3) clarify interim transition disclosure requirements for ASC 842.


ASU 2019-01

  • Fair value of underlying asset. Lessors that are not manufacturers or dealers
  • Cash flow presentation. Lessors that are depository or lending institutions in the scope of ASC 942 that enter into sales-type or direct financing leases
  • Interim period transition disclosures. All companies adopting ASC 842 that have interim reporting requirements

Relevant dates

Proposed effective date:  Public business entities All other entities
Annual periods – Fiscal years beginning after December 15, 2019 December 15, 2019
Interim periods – In fiscal years beginning after December 15, 2019 December 15, 2020
Early adoption allowed? Yes Yes


Key impacts

The ASU:

  • Reinstates the specific fair value guidance in ASC 840 for lessors that are not manufacturers or dealers that ordinarily requires them to measure the fair value of an underlying asset at its cost, reflecting any volume or trade discounts, and including costs incurred to acquire the asset (e.g. sales taxes and delivery/installation costs)
  • Requires lessors that are depository or lending institutions in the scope of ASC 942 to classify the principal portion of lessee payments received from sales-type or direct financing leases as cash flows from investing activities, and the interest portion as cash flows from operating activities
  • Clarifies that companies are exempt from the interim period transition disclosure requirements in paragraph 250-10-50-3 when adopting ASC 842  

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