Hot Topic | April 2020

 

Insight

Lease accounting impacts of the COVID-19 virus

This Hot Topic addresses impacts to companies’ lease accounting from the economic effects of the COVID-19 pandemic.

Scott Muir

Scott Muir

Partner, Dept. of Professional Practice, KPMG US

+1 212-909-5073

The economic and financial markets effects of the COVID-19 outbreak may have a number of impacts on companies’ lease accounting under ASC 842. This article follows our recent Hot Topics on accounting for rent concessions resulting from the COVID-19 outbreak.

Applicability

  • Lessees and lessors impacted by the COVID-19 outbreak.

Relevant dates

Effective date: Public entities All other entities

Annual periods – Fiscal years beginning after      

December 15, 2018

December 15, 2020

Interim periods – In fiscal years beginning after

December 15, 2018

December 15, 2021

Early adoption allowed

N/A

Immediately

 

Key impacts

The economic and financial markets effects of the COVID-19 outbreak may have one or more of the following impacts on a company’s lease accounting:

  • Impairment of a lessee’s ROU assets and lessor’s owned assets held out for lease
  • Abandonment of ROU assets
  • Lessee discount rates
  • Lessee reassessments
  • Fair values
  • Lease cost and operating lease revenue recognition
  • Lessor revenue recognition – collectibility

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