FASB finalizes lessor ASC 842 amendment
Defining Issues | July 2021
Lessors will classify leases with variable payments as operating if another classification would trigger a Day 1 loss.
Relevant dates
- July 19, 2021 – FASB issues final ASU
- April 14, 2021 – FASB reaches final decision on lessor leases with variable payments that would trigger a Day 1 loss if classified as sales-type or direct financing – Tentative Decision
- February 10, 2021 – FASB redeliberates ‘targeted improvements’ proposals, leaving only the issue of lessor leases with variable payments on its technical agenda and removing the other two issues – Tentative Decision
- December 4, 2020 – Comments deadline on proposed ASU
- October 20, 2020 – Proposed ASU with three ‘targeted improvements’ to ASC 842 issued
- July 29, 2020 – Leasing and agenda-setting decisions reached; ‘targeted improvements’ project added to the technical agenda
| Effective date | Public entities | All other entities |
|---|---|---|
Annual periods – Fiscal years beginning after | December 15, 2021 | December 15, 2021 |
Interim periods – In fiscal years beginning after | December 15, 2021 | December 15, 2022 |
Early adoption allowed in fiscal years beginning after | Yes, but not before adopting ASC 842 | |
Key impacts
Lessors will classify a lease with variable payments that do not depend on an index or rate as an operating lease if:
- the lease would have been classified as a sales-type lease or a direct financing lease under the pre-ASU lease classification criteria; and
- sales-type or direct financing lease classification would result in a Day 1 loss.
Report contents
- Applicability
- Fast facts, impacts, actions
- Background
- Final amendment
- Effective dates and transition
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FASB finalizes lessor ASC 842 amendment
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Resource
Handbook: Leases
Latest edition: Our in-depth guide to ASC 842 – with Q&As, interpretive guidance and examples.
Leases
Our reporting, guidance and publications relevant to the FASB's new leases standard for lessees and lessors for all industries. KPMG specialists provide an in-depth look at ASC 842 implementation
Leases: Executive summaries
To help you understand the impact of the new leases standard, ASC 842, read KPMG's overviews of the leases guidance.
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