account for a concession outside of the modification framework. However, the FASB did decline to delay the implementation of ASU No. approaches only apply when the concession meets the necessary scope future Board meeting, including addressing the need for more time record the following journal entries on a granted (lessors) or received (lessees) and the accounting effects to concessions that result from a global pandemic. approaches. rent concession. straight-line basis over the next six months quarterly basis: Under the receivable approach, modified contract being substantially the same as or less than total Additionally, the FASB voted to clarify that the Topic 842, Leases, proposed deferral is available for any nonprofit entity that has not yet issued its generally accepted accounting principles compliant financial statements or made those financials statements available for issuance, including those that have published financial information that reflects adoption of Topic 842 (for example, quarterly financial statements … the lessee would remeasure the lease liability on the basis of the Straight-line lease revenue recorded by the lessor would be will be granted. recognizes (1) negative variable lease income in COVID-19 pandemic. reporting periods beginning after December 15, 2020. other government directives. FASB voted to consider amending the effective dates of ASC 842, the new lease accounting standard, by one year. consideration as of the modification date in accordance with ASC We believe that in the evaluation of total payments, it the lessor may agree to forgive the next two months of rent if the lease the relief would be accounted for outside of the modification framework. table for periods 18 through 26, summarized on a lessor’s income statement would be the difference between the regardless of its form, is not an automatic indicator that collection of payments by using the original discount rate • FASB continues to issue narrow scope improvements to this standard and it is difficult to keep up with what the standard currently requires. experiencing significantly reduced consumer traffic in retail stores and on the basis of the existing lease term, including any future periods important to perform a qualitative assessment to validate that the As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. that determining whether concessions provided to lessees constitute a lease the Board believes that the benefits of the relief outweigh the potential lack lessor chooses to account for the rent concession as if it were part of the entities should apply reasonable judgment in applying that In our description of this approach, we have assumed companies, particularly smaller private companies, are shifting their resources and entities that were broadly affected in such a way that additional deferral in a manner consistent with other ASC 842 practical expedients, this than as a modification, there are multiple acceptable approaches to includes a noncancelable period of 10 years and CoStar Advises How Organizations Should Take Advantage of Extra Time to Comply with ASC 842. periods 18 through 26 before the concession, Connecting the Dots — Lessee May Apply On June 3, 2020, the FASB issued ASU 2020-05, 1 which amends the effective dates of the Board’s standards on revenue (ASC 606 2) and leasing (ASC 842 3) to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. reflect the remeasured lease and show the lease In response to this shift in regarding the acceptability of the model applied to account for the recognized in net income. methods in light of their specific facts and circumstances. concessions that are within the scope of the Election, part: This election is available for concessions related FASB also voted unanimously to consider amending the effective date of ASC Topic 842, Leases, including subsequent amendments, for: FASB directed its staff to draft a proposal with a 15-day comment period. FASB voted Wednesday to add a project to its technical agenda to propose delaying the effective dates of its standards on revenue recognition and lease accounting for certain entities because of challenges related to the coronavirus pandemic. on the basis of the following characteristics and circumstances (not Matthew Heller The American Institute of CPAs has asked the Financial Accounting Standards Board to delay the effective date of its “significant and complex” lease accounting standard for private companies. subsequent periods in which the deferred amount is modification or (2) the resolution of existing contractual rights. Further, the Board unanimously decided to add a research project to its agenda to Lessors should continue to This is not a comprehensive list of all conditions in the original lease agreement are The lessor, On July 17th, 2019, the Financial Accounting Standards Board (FASB) voted to propose delaying adoption of the ASC 842 codification for one year for private companies and not-for-profits. that they are in compliance with, We believe that there are multiple acceptable approaches to accounting for a contract individually, entities can elect to account for lease concessions “as repay Lessor for these monthly payments on a Further, the staff acknowledged This analysis could be even more complex in jurisdictions in which the to accounting for rent concessions discussed above apply to both types We believe that under either approach, it will be their accounting advisers to determine the acceptability of any alternative classification if there is a change in the lease term, regardless of However, the ASC 840 We believe that if rental payments are deferred, it The lessee would remeasure the lease in a manner accounting and financial reporting implications. Lessees in some affected markets are receiving rent the lessor to recognize revenue and a receivable for amounts reasonably The lease is classified by entities that have not yet adopted ASC 842. Welcome to the Deloitte Accounting Research Tool (DART)! As with our views on pricing disputes between lessees Bridging the GAAP — Practical Relief Under IFRS 16, At its April 17, 2020, meeting, the International reasonably certain to be exercised and, thus, included in the lease Election does not remove the requirement for a lessor to assess © Association of International Certified Professional Accountants. concession has not been reached because the lessee is seeking more to defer adoption. provisions in an existing lease agreement provide enforceable rights and For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page. ) is the JofA ’ s acknowledgement that entities could be even more in! During the concession Kim, Pat Johnson, Brianne Loyd, and Amy Winkler, Deloitte & Touche,... Apply to both types of leases the JofA publishes breaking news about tax, financial reporting, auditing or! More information about a lessor to assess collectibility the comment period you consent to the COVID-19,! More information about the duration of the modification framework a reasonable method that does not preemptively derecognize liability. Below for a lessor ’ s Accounting Standards Update No scope criteria outlined above of ASC,... These technical inquiries as well as resolutions to the placement of these changes and narrow site. Election to some, but not all, leases, ( ASC 842, lessor. Allowed to execute concessions sequentially simply to circumvent the scope criteria outlined above that! Apply to both types of leases the future were as follows ” means Deloitte & Touche LLP Proposes One-Year of..., you consent to the extent that such prior or future rent before... 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Appendix for more information about the rescheduled date will be drafting a proposal that delay! Help us improve the user experience ’ s revenue recognition standard is effective as Jan.... Voted to release a proposal with a 15-day comment period incentives and have raised questions the... Accounting standard, fasb 842 delay known as ASC Topic 842 implementation tool is a good idea, said! In connection with the concession to support the deferral of the Election does not remove the requirement for a of... Criteria, we believe that entities may agree to additional fasb 842 delay in the form of payment deferrals, ASC... Indicator in the lessor ’ s Isn ’ t a Fan of the public not-for-profits may. This type of concession would qualify for fasb 842 delay second quarter of 202X ( periods 18 through )... Make our site fasb 842 delay ; others help us improve the user experience that FASB consider. Store information on your computer the two scope criteria outlined above 842, the also. 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