The amendments proposed by the FASB would change and clarify the risk-free discount rate practical expedient for private entity lessees.
Applicability
- Private company and not-for-profit entity lessees
Relevant dates
- June 16, 2021 – Proposed ASU issued on private entity risk-free discount rate practical expedient
- July 16, 2021 – Comment deadline on proposed ASU
| Effective date of proposed amendments | All eligible entities |
|---|---|
Annual periods – Fiscal years beginning after |
December 15, 2021 |
Interim periods – In fiscal years beginning after |
December 15, 2022 |
Early adoption allowed? |
Yes, but no earlier than the entity’s adoption of ASC 842 |
Key impacts
The FASB proposes amendments to ASC 842 that would:
- If elected, permit private entity lessees to elect the risk-free discount rate practical expedient by class of underlying asset, instead of requiring it to be applied to all leases.
- Clarify that a lessee would still use the rate implicit in the lease when it is readily determinable even if it has elected the risk-free rate discount rate expedient.
The proposed ASU has a 30-day comment period. The proposed amendments will only become GAAP if and when the Board issues a final ASU.
Report contents
- Applicability
- Fast facts, impacts, actions
- Background
- Proposed amendments to the practical expedient
- Proposed effective date and transition methods
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