Alert: FASB Accounting Standards Update No. 2019-01 – Leases: Codification Improvements

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2019-01 – Leases: Codification Improvements

On March 5, 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-01 Leases (Topic 842): Codification Improvements to clarify implementation guidance and disclosure requirements in the new leases standard.

The amendments resulting from this ASU are summarized as follows:

  • A previously available exception is reinstated for lessors that are not manufacturers or dealers. For these entities, this exemption allows for the fair value of the leased property at lease commencement to be determined as its cost, reflecting any volume or trade discounts that may apply, rather than applying the fair value definition from Topic 820 Fair Value Measurement. However, if a significant amount of time lapses between the acquisition of the underlying asset and lease commencement, the lessor will be required to determine the fair value in accordance with Topic 820.
  • Lessors that are depository and lending institutions within the scope of Topic 942 Financial Services – Depository and Lending are now permitted to continue to present all principal payments received under sales-type and direct financing leases within investing activities in the cash flow statement. All other lessors will present all cash receipts from leases within operating activities.
  • Clarification is added to exempt lessees and lessors from the requirement to provide specific interim transition disclosures in the year of adoption.

The amendments are effective as follows:

  • For public business entities, certain not-for-profit entities, and any employee benefit plans that are U.S. Securities and Exchange Commission (SEC) filers, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods therein.
  • For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted for all entities. If an entity early adopts, the ASU will be applied as of the date the entity first applies Topic 842, using the same transition methodology.

To access the full script of ASU No. 2019-01, click here.

This communication contains a general overview of the topic and is current as of March 5, 2019. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2019. All rights reserved.


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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.