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Chair Jones: new rules coming ‘shortly’ on government assistance, variable lease payments

Companies will not have to wait long this year for new disclosure rules on government assistance and on variable lease payments, according to FASB Chair Richard Jones.

Two final standards “that you will see shortly” will be issued on disclosing government assistance and on lessors accounting for certain leases with variable lease payments, Jones said at the June 24, 2021, Financial Accounting Standards Advisory Council (FASAC) meeting, held virtually.

The FASB in late May voted to issue a narrow package of government assistance disclosure rules to provide investors with an understanding of the terms and conditions, contingencies and longevity of government assistance agreements, the risks associated with those agreements and how the agreements would affect financial results. The rules will take effect in 2022 for all companies.

Similarly in April, the board voted to amend Topic 842, Leases, to require sales-type leases where payments vary to be accounted for as operating leases

The guidance would enable a transaction to be recognized as an operating lease if it is a sales-type lease with any variable payments that is not based on an index or rate and has a selling-loss at the start of the lease. The rules would also apply to direct-financing leases. The rules will take effect in 2022 for public companies and in 2023 for private companies.

Separately, Jones said later this summer the board plans to issue an exposure draft for public comment on fair value measurement of equity securities subject to contractual restrictions.

The FASB in late May voted on the proposal to amend Topic 820, Fair Value Measurement, to clarify that lock-up agreements are entity specific and not a part of the unit of account in the measurement of fair value of equity securities.

Lock-up restrictions are agreements that are executed with an initial public offering (IPO) to prevent the sale of equity securities by certain investors for about six months after the offering.

The proposal could reduce confusion about how to report such items and it would also apply to all contractual restrictions on sales.

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