Transition Requirements Under New Lease Accounting Rules | FTI Consulting

Transition Requirements Under the New Lease Accounting Rules (Part V)

Forensic & Litigation Consulting | Bloomberg BNA (Reprint)

January 8, 2018

This article is the fifth and the final in a series of articles exploring the new guidance on accounting for leases (ASC 842) issued by the Financial Accounting Standards Board (“FASB”) in February 2016. This article discusses the effective date of and transition requirements under ASC 842.

Effective Date of ASC 842

Topic 842 is effective for public business entities, not-for-profit entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and employee benefit plans that file or furnish financial statements with or to the Securities and Exchange Commission in financial statements for periods beginning after Dec. 15, 2018, including interim reporting periods within those fiscal years (for a company with a calendar year end, Topic 842 will be effective beginning Jan. 1, 2019). For all other entities, ASC 842 is effective in financial statements for fiscal years beginning after Dec. 15, 2019 and for interim reporting periods beginning after Dec. 15, 2020 (for a company with a calendar year end, Topic 842 will be effective beginning Jan. 1, 2020).

Transitioning to ASC 842

Note: At its Nov. 29, 2017 meeting, FASB tentatively decided to allow reporting entities to adopt Topic 842 by recognizing a cumulative effect adjustment on the effective date of the new guidance (i.e., Jan. 1, 2019 for a public company with a calendar year end). FASB will issue a proposed Accounting Standards Update with the alternative transition method for comment. The change to the transition approach in Topic 842 will likely be finalized during the first quarter of 2018. Any further FASB discussions on the practical expedients in Topic 842 is not expected to be affected by the board's decision to permit an additional transition method. Further, reporting entities will continue to have the option of applying the modified retrospective approach, although once the board finalizes the amendment to permit adoption by the cumulative effect approach, it is unlikely reporting entities will elect the modified retrospective approach.

Posted with permission from Bloomberg BNA. Copyright ©2018. All rights reserved.

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