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.

(Revised) Wednesday, October 31, 2018 FASB Board Meeting

Lessor narrow scope improvements. The Board redeliberated the proposed amendments to Topic 842, Leases, for three issues related to lessor accounting in that Topic.

Issue 1: Sales Taxes and Other Similar Taxes Collected from Lessees

The Board affirmed its decision to provide an accounting policy election for sales and other similar taxes not to be accounted for as lessor costs as provided in the proposed Accounting Standards Update.

Issue 2: Lessor Costs

The Board decided to require that lessors exclude from variable payments all costs paid by a lessee directly to a third party. Additionally, the Board decided that costs not part of the consideration in the contract that are paid by a lessor directly to a third party and are reimbursed by a lessee are considered lessor costs that the lessor should account for as variable payments.

Issue 3: Recognition of Variable Payments for Contracts with Lease and Nonlease Components

The Board affirmed its decision to clarify paragraph 842-10-15-40, subject to additional amendments that would further clarify how and when variable payments may be allocated to a lease component only.

Transition and Effective Date

For entities that have not yet adopted the amendments in Accounting Standards Update No. 2016-02, Leases (Topic 842), the Board decided to align the transition and effective date guidance of a final Update with the guidance in the amendments in Update 2016-02.

For entities that have already adopted Update 2016-02 at the time a final Update is issued, the Board decided that the effective date should be the original effective date of Update 2016-02 for those entities. Alternatively, those entities may adopt the amendments either (1) in the first reporting period ending after issuance of the Update or (2) in the first reporting period following the issuance of the Update. The Board decided to allow either prospective application or retrospective application for entities that have already adopted the amendments in Update 2016-02.

The Board decided that the amendments apply to all new and existing leases.

Analysis of Costs and Benefits

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

Next Steps

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