The final ASU will change and clarify the risk-free discount rate practical expedient for private entity lessees.
Applicability
ASC 842, Leases
- Private company and not-for-profit entity lessees
Relevant dates
- September 15, 2021 – FASB affirmed amendments in the proposal, and directed the FASB staff to draft a final ASU – Tentative decisions
- July 16, 2021 – Comment deadline on proposed ASU
- June 16, 2021 – Proposed ASU issued on private entity risk-free discount rate practical expedient
| 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 amendments to ASC 842 will:
- 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 should 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 amendments will only become GAAP when the Board issues the final ASU.
Report contents
- Applicability
- Fast facts, impacts, actions
- Background
- Proposed amendments to the practical expedient
- Proposed effective date and transition methods
Related content
Subscribe to our newsletter
Receive timely updates on accounting and financial reporting topics from KPMG.
Receive timely updates on accounting and financial reporting topics from KPMG.
Sign up now
ARO
Use our Accounting Research Online for financial reporting resources.
Use our Accounting Research Online for financial reporting resources.
Access ARO