On March 27th, the
Financial Accounting Standards Board (FASB) published an
Accounting Standards Update (ASU) that adds enhancements to the guidance for applying
Topic 842, Leases to arrangements between entities under common control. Some stakeholders shared concerns with applying Topic 842 to related party arrangements between entities under common control during the process of FASB’s
post-implementation review (PIR) of Topic 842.
The ASU, an amendment of the FASB Accounting Standards Codification, provides private companies and non-profit organizations with a practical expedient to apply guidance. This refers to entities that are not conduit bond obligors (entities obligated for the repayment of conduit debt securities). The ASU helps these entities use the written terms and conditions of a common control arrangement to determine if a lease exists and its classification and accounting for that lease.
The current ASU requires all entities, including public companies, to amortize leasehold improvements related to common control leases over the useful life to the common control group.
The FASB Accounting Standards Codification is the source of authoritative generally accepted accounting principles (GAAP) determined by the FASB to be used by nongovernmental entities. Although an ASU is not authoritative, it discloses how the Accounting Standards Codification is being amended and provides other information to help GAAP users understand how and why GAAP is changing and when the changes will go into effect.
The ASU is available at fasb.org.
Source:
FASB Improves Leases Guidance on Related Party Arrangements Between Entities Under Common Control (fasb.org)
