Tentative Board Decisions

Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.

Wednesday, April 14, 2021 FASB Board Meeting

Leases (Topic 842)—lessors—leases with variable lease payments. The Board completed its redeliberations on the issue of sales-type leases with variable lease payments in the proposed Accounting Standards Update, Leases (Topic 842): Targeted Improvements, and made the following decisions.

The Board decided that a lessor should classify a lease with variable lease payments that do not depend on an index or a rate as an operating lease at lease commencement if:
  1. The lease would have been classified as a sales-type lease or direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 and 25-3, respectively.
  2. The lessor would have recognized a selling loss at lease commencement.
Transition and Effective Date

The Board decided the following:
  1. All lessors that have not adopted Topic 842 on or before the fiscal years beginning after December 15, 2021, would follow the transition requirements in paragraph 842-10-65-1.
  2. Lessors that have adopted Topic 842 on or before the fiscal years beginning after December 15, 2021, would have the option to apply the amendments in a final Accounting Standards Update in either of the following ways:
    1. Retrospectively to leases that commence or are modified on or after the adoption of Topic 842
    2. Prospectively to leases that commence or are modified on or after the date that a lessor first applies the amendments in a final Update.
  3. Early adoption is permitted but not before adoption of Topic 842.
Cost-Benefit Analysis

The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the amendments and that the expected benefits of the amendments would justify the expected costs.

Next Steps

The Board directed the staff to draft an Accounting Standards Update for vote by written ballot.


Leases (Topic 842)—discount rate for lessees that are not public business entities. The Board discussed the risk-free discount rate accounting policy election for lessees that are not public business entities in Topic 842, Leases. That election allows lessees that are not public business entities to use a risk-free rate as the discount rate for all leases. The Board made the following decisions. 
 
The Board added a project to its technical agenda to amend the accounting policy election for lessees that are not public business entities to use a risk-free rate as the discount rate.
 
Issue 1
 
The Board decided that a lessee that is not a public business entity may make the risk-free rate accounting policy election by class of underlying asset.

The Board decided to require a lessee to disclose its election, including the asset class to which it has made the accounting policy election.

Issue 2

The Board decided to retain a risk-free rate for the discount rate accounting policy election, rather than another specified rate, such as a corporate bond rate or the prime rate.

Issue 3

The Board decided that a lessee using the discount rate accounting policy election should be required to use the rate implicit in the lease when it is readily determinable instead of the risk-free rate.

Transition and Effective Date 
  1. For a lessee that is not a public business entity that has not adopted Topic 842 as of the issuance of a final Update, the Board decided that the transition and effective date provisions in paragraph 842-10-65-1 would apply.
  2. For a lessee that is not a public business entity that has adopted Topic 842 as of the issuance of a final Update, the Board decided to require the use of a modified retrospective transition method. That transition method would require a lessee to:
    1. Remeasure affected lease liabilities and right-of-use assets for existing leases at the beginning of the period of adoption and record the cumulative effect of transition in retained earnings
    2. Calculate the transition adjustment using the discount rate and remaining lease term as of the adoption date
    3. Not otherwise remeasure or reclassify leases as a result of transition
    4. Disclose the fact that the amendments have been adopted and the amount of the transition adjustment.
  3. For a lessee that is not a public business entity that has adopted Topic 842 as of the issuance of a final Update, the Board decided that the amendments should be effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods beginning after December 15, 2022, with early application permitted.
Cost-Benefit Analysis and Comment Period

The Board concluded that it has received sufficient information and analyses to make informed decisions on the issues presented and that, subject to what it learns through comment letters, the expected benefits of the amendments would justify the expected costs.

The Board decided to provide a 30-day comment period for the proposed Accounting Standards Update.

Next Steps

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.


Simplifying the balance sheet classification of debt. The Board discussed comments received on and redeliberated the proposed amendments in its January 2017 proposed Accounting Standards Update and its September 2019 proposed Accounting Standards Update (Revised), Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). 

The Board removed the project from its technical agenda.
 
Next Steps

The Board directed the staff to solicit input from investors and other stakeholders, as part of the FASB’s Agenda Consultation research project, on the need for and prioritization of potential improvements to current versus noncurrent classification of assets and/or liabilities in a classified balance sheet.