The Financial Accounting Standards Board (FASB) on July 18, 2018, published a slate of minor technical corrections to the lease accounting standard.
Accounting Standards Update (ASU) No. 2018-10, Codification Improvements to Topic 842, Leases, largely mirrors the changes to the lease standard from the September 2017 Proposed ASU No. 2017-310, Technical Corrections and Improvements to Recently Issued Standards I. Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities; II. Accounting Standards Update No. 2016-02, Leases (Topic 842). The clarifications range from corrections to cross references within the standard’s text and an alignment of the standard’s terminology with other parts of U.S. generally accepted accounting principles (GAAP). Some changes explain how to classify a lease if changes are made to its terms and conditions.
The changes were characterized as editorial revisions.
The FASB “does not anticipate that entities will incur significant costs as a result of the amendments,” the board said. “The amendments do not create new accounting requirements.”
The FASB typically has a yearly release of technical corrections to several standards. The board decided to release the corrections to the lease standard and its separate, similarly high-profile financial instruments standard apart from the usual annual package because they are two of the FASB’s most significant accounting updates in recent years.
The FASB published the lease accounting standard in February 2016 in ASU No. 2016-02, Leases (Topic 842), after a decade of debate. The standard requires companies to report on their balance sheets their leased office space, storefronts, vehicles and equipment as assets, and the rent they owe for them as liabilities. It goes into effect in 2019 for public businesses and is expected to cause significant changes to company balance sheets.
ASU No. 2018-10 addresses only the corrections to the lease accounting standard. It offers 16 changes to FASB ASC 842, Leases, all of which the FASB characterized as editorial and not fundamental changes to the accounting standard.
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