Defining Issues   |   January 2018

 

Final ASU on land easements issued

KPMG reports that the FASB’s final ASU on accounting and transition for land easements has been issued.  The amendments to US GAAP clarify that land easements are within the scope of the new leases standard (ASC 842) and introduce a new transition practical expedient allowing a company to not assess whether existing and expired land easements that were not previously accounted for as leases under current US GAAP (ASC 840) are or contain leases under ASC 842.

Applicability

ASU 2018-01

  • All companies with land easements, particularly in the energy, utilities, transportation and telecom industries.

Relevant dates

  • Effective date coincides with the effective date of the new leases standard for companies that have not early adopted.
  • For companies that have early adopted the new standard, the final ASU is effective upon issuance.

Key impacts

ASU 2018-01:

  • Specifies that land easements – as rights to use land – are within the scope of the new leases standard and should be analyzed to determine if they meet the new definition of a lease. A company should apply other guidance – e.g. the guidance on intangible assets – only if the land easement does not meet the definition of a lease
  • Grants an optional practical expedient that permits a company at transition to not assess whether expired or existing land easements that were not previously accounted for as leases under current US GAAP are or contain leases under the new leases standard.

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