FASB to Make Lease Accounting Standard a Little Easier

Chris Gaetano
Published Date:
Nov 30, 2017
By Photos public domain [Public domain], via Wikimedia Commons

The Financial Accounting Standards Board (FASB) gave final approval to a proposed update that allows entities to use a practical expedient when it comes to land easements, according to Accounting Today

The approved amendment, regarding land easements, clarifies that land easements should be evaluated as a possible lease but provided a practical expedient for those granted prior to the standard's approval. A land easement is the right to use, access or cross another entity's land for a specified purpose, like power and cable lines. The FASB said that, currently, there's no consistent treatment for land easements: some account for them using the lease standard, but others use the guidance for intangibles and goodwill, while others still use the guidance for property, plants and equipment.

The proposal was made in response to stakeholder concerns regarding the practicality of using the lease guidance to account for land easements, saying that evaluating all existing land easements to assess whether they meet the definition of a lease would be a Herculean ordeal and that, furthermore, most easements wouldn't even meet the definition of a lease anyway. 

The FASB also directed the staff to develop a new update that would allow lessors, in certain cases, to not have to separate lease from nonlease components, and not have to provide comparative period financial statements when transitioning to the new lease standards (the organization would instead  apply the transition provisions of the leases standard at its effective date.) 

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