Final amendments 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
- June 16, 2021 – Proposed ASU issued on private entity risk-free discount rate practical expedient
- July 16, 2021 – Comment deadline on proposed ASU
- September 15, 2021 – FASB affirmed amendments in the proposal, and directed the FASB staff to draft a final ASU – Tentative decisions
- November 11, 2021 – FASB issues final ASU
| Effective date of proposed amendments | Entities that adopted ASC 842 before final ASU issued | Entities that did not adopt ASC 842 before final ASU issued |
|---|---|---|
Annual periods – Fiscal years beginning after |
December 15, 2021 |
Adopt when the entity adopts ASC 842 |
Interim periods – In fiscal years beginning after |
December 15, 2022 |
|
Early adoption allowed? |
Yes, as of beginning of fiscal year |
Key impacts
The final amendments:
- 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 must 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.
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