The Financial Accounting Standards Board (FASB) has released a new update intended to make implementing the new lease standards a little easier. 

“The targeted improvements in the ASU address areas our stakeholders identified as sources of unnecessary cost or complexity in the leases standard,” stated FASB Chairman Russell G. Golden. “They represent the FASB’s commitment to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard without compromising the quality of information provided to investors.”

One part has to do with implementation dates. The new guidance offers an additional, and optional, transition method to adopt the new standard. Those that use this method would initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers' requests. If an entity chooses to do this, then it would need to provide all required disclosures for all periods that continue to be in accordance with the new lease standards. Previously, entities could use only a modified retrospective transition method. 

Another part has to do with the requirement that an entity separate lease from nonlease components in a contract. The new guidance provides a practical expedient for the lessor side, allowing lessors to account for lease and nonlease components as a single component, provided that: the timing and pattern of transfer of the nonlease component and the associated lease component are the same; and that the lease component, if accounted for separately, would be classified as an operating lease. 

If an entity chooses to apply this practical expedient, it would need to disclose: the fact that it is using the expedient; which classes of underlying assets the lessor applied this expedient to; the nature of the lease and nonlease components that were combined as a result of applying the expedient; and the topic the entity applies to the component element, whether Topic 606 (which concerns revenue recognition) or Topic 842 (the lease standard). 

For entities that have not yet adopted the new lease standard, the effective date for the update is the same. For those that have adopted the new lease standard, the practical expedient can be used either in the first reporting period following the issuance of this update or at the original effective date of Topic 842 for that entity; the practical expedient may be applied either retrospectively or prospectively.