On the Horizon

Leasing Practical Expedients


In the coming months, the FASB will issue guidance that is expected to reduce cost and ease implementation of the Leases standard for financial statement preparers without compromising the quality of information provided to investors. It will simplify the transition requirements and, for lessors, will provide several practical expedients for the separation of nonlease components from lease components and for the accounting and reporting of certain lessor costs.
 
Specifically, the amendments will:
  • Add an option that would permit an organization to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements
  • Add a practical expedient that would permit lessors to not separate nonlease components from the associated lease components if certain conditions are met. This practical expedient could be elected by class of underlying assets; if elected, certain disclosures would be required.
  • Add two other practical expedients that would permit lessors to account for and report sales taxes and certain lessor costs in a manner that is more closely aligned with the new revenue guidance. 
More information can be found on the project page.

 

Disclosure Framework


In the coming months, the FASB will issue four final documents intended to improve the effectiveness of disclosures in notes to financial statements. They include:
  • A new chapter in the FASB’s conceptual framework on disclosures
  • An update to an existing chapter of the conceptual framework that aligns the FASB’s definition of materiality with other definitions in the financial reporting system
  • An update to Fair Value Measurement disclosure requirements.
  • An update to Defined Benefit Plan disclosure requirements. 
More information can be found on the project page.

 

Non-Employee Stock Compensation


During the second quarter of 2018, the FASB will issue a new standard that will simplify the accounting for nonemployee share-based awards.
 
The guidance will expand the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based awards granted to employees, to also include share-based awards granted to nonemployees in exchange for goods and services to be used in a grantor’s own operations. Consequently, the accounting for nonemployee share-based awards will be substantially aligned with the accounting for employee share-based awards. The standard would supersede Subtopic 505-50, Equity—Equity Based Payments to Non-Employees.
 
The accounting for nonemployee share-based awards was identified as an area for simplification through:
  • Ideas submitted to the FASB as part of the Board’s Simplification Initiative
  • The Private Company Council’s (PCC) ongoing dialogue about making improvements to accounting for share-based awards
  • The Post-Implementation Review of FASB Statement No. 123(R), Share-Based Payment. 
The standard will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an organization’s adoption date of Topic 606, Revenue Recognition.
 
More information can be found on the project page.