Defining Issues | April 2021

 

Insight

FASB revisits risk-free discount rate expedient

FASB tentatively decides private entities may elect risk-free discount rate expedient by class of underlying asset.

On April 14, 2021, the FASB discussed the risk-free discount rate practical expedient available to private and not-for-profit entity lessees, reaching tentative decisions to revise and clarify the expedient.

Applicability

ASC 842, Leases

  • Private company and not-for-profit entity lessees

Relevant dates


Key impacts

The FASB reached tentative decisions to:

  • Permit private entity lessees to elect the risk-free discount rate practical expedient by class of underlying asset, rather than on an entity-wide basis.
  • Clarify that a lessee should still use the rate implicit in the lease when it is readily determinable even when it has elected the risk-free rate discount rate expedient.
  • Issue a proposed ASU, subject to a 30-day comment letter period. The FASB staff indicated that a proposed ASU will likely be issued in June 2021.

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