Hot Topic | May 2021

 

Insight

Applying the lessee short-term lease exemption

Key considerations for lessees when determining whether to elect – and how to apply – the short-term lease exemption.

Although short-term leases are in the scope of ASC 842 (leases), a simplified form of accounting is permitted.

Applicability

  • All lessees that have or will apply ASC 842

Relevant dates

Effective Public companies Public not-for-profit entities Private entities

Annual periods – Fiscal years beginning after                                                                                    

December 15, 2018

December 15, 2019

December 15, 2021

Interim periods – In fiscal years beginning after     

December 15, 2018

December 15, 2019

December 15, 2022

Early adoption allowed?

N/A

N/A

Immediately

 

Key impacts

  • Discusses the scope and disclosure requirements of the short-term lease exemption
  • Provides reminders on how common lease terms impact eligibility for the exemption
  • Provides answers to commonly asked questions about applying the exemption

Report contents

  • Key impacts
  • Whether to elect the exemption
  • Is 12 months a ‘bright line’?
  • Must I reassess short-term leases?
  • Lease term with non-consecutive periods of use
  • Notice periods
  • Short-term lease renewals
  • Evergreen leases
  • Residual value guarantees
  • Effect of past short-term lease renewals on transition
  • Other considerations
  • Effective date

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