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FASB discusses Codification improvements for lessors

  • FASB meeting Image

Dec 06, 2018

At its December 4, 2018, meeting, the FASB decided to add a project to its technical agenda on Codification improvements for lessors.

The project will address the following two issues:

  • The determination of the underlying asset’s fair value by lessors that are not manufacturers or dealers — The Board decided that “if a lessor is not a manufacturer or a dealer, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply,” unless a significant amount of time elapses “between the acquisition of the underlying asset and lease commencement,” in which case the lessor should apply the definition of “fair value” (this exception is similar to the one in ASC 840).
  • Presentation in the statement of cash flows — sales-type and direct financing leases — The Board decided that lessors that are financial institutions within the scope of ASC 942 “would present all ‘principal payments received under leases’ within investing activities as opposed to operating activities.”

In addition, the Board (1) made tentative decisions regarding the transition and effective date for the amendments and (2) analyzed the costs and benefits. The Board directed its staff to draft a proposed ASU for a vote by written ballot.

For more information, see our related journal entry as well as the tentative Board decisions on the FASB’s Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.