![]() ![]() Entities are not required to repeat disclosures if the information is already presented in the financial statements as required by other accounting standards.Īlthough the majority of the disclosures required by ASC 842 only affect an entity’s annual financial statements, the new standard requires that lessors provide a table disclosing lease income for each interim and annual reporting period. However, as a guiding principle, the basis for conclusions indicates “if leasing is a significant part of an entity’s business activities, the disclosures would be more comprehensive than for an entity whose leasing activities are less significant….” For example, although the new standard does not provide specific quantitative or qualitative disaggregation requirements such as those required under ASC 606, for entities for which leasing is a significant portion of their business, such disaggregation might be appropriate.Įntities must make appropriate disclosures for each annual reporting period for which a statement of comprehensive income (statement of activities) is presented and in each year-end statement of financial position. With that objective in mind, significant judgment will be required to determine the level of disclosures necessary for an entity. A lessee shall aggregate or disaggregate disclosures so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or by aggregating items that have different characteristics.” Disclosure ObjectiveįASB Accounting Standards Codification (ASC) 842-20-50-1 and 842-30-50-1 provide that “the objective of the disclosure requirements is to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.” The standard further indicates that “a lessee shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. ![]() As a result, the new standard also introduces an overall disclosure objective together with significantly enhanced presentation and disclosure requirements for leases. See BDO KNOWS: FASB Topic 842, Leases for an overview of the standard.ĭuring deliberations for the standard, many users indicated that the existing disclosure requirements did not provide sufficient information to understand an entity’s leasing activities. The pattern of expense recognition in the income statement will depend on a lease’s classification. Under its core principle, a lessee will recognize right-of-use (“ROU”) assets and related lease liabilities on the balance sheet for all arrangements with terms longer than 12 months. In February 2016, the Financial Accounting Standards Board (“FASB” or “the Board”) issued its highly-anticipated leasing standard in ASU 2016-02 (“ASC 842” or “the new standard”) for both lessees and lessors. FASB Topic 842 Accounting For Leases - Presentation & Disclosure Introduction ![]()
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