Leases – Part Five

Five Areas Where It’s Easy to Stump Your Toe ASC 842 is in full swing now. Most private companies and CPA firms have been in the weeds for some time. It would be an understatement to say the standard is massive and not entirely transparent. Because ASC 842 is principle-based and yet very specific in certain areas, it’s far too easy to make implementation errors. In no particular order, here are my top five areas prone to mistakes. Misunderstanding the Effective Date for Interim Financial Statements. The effective date for private companies and private not-for-profit entities is fiscal years beginning Read More »

Leases – Part Four

Common Control Lease Arrangements – Give Me a Break? On November 30, 2022, the FASB issued, for public comment, Exposure Draft 2022-ED500 Leases (Topic 842)-Common Control Arrangements (Update). The Update proposes significant changes to common control arrangements (leases between related party entities) in two areas: Issue 1. Determining if a related party lease between entities under common control exists and, if so, the classification and accounting for that lease, and Issue 2. Lessee accounting for leasehold improvements associated with leases between parties under common control. The proposed amendment to Issue 1 above would be available as a practical expedient for Read More »

Leases – Part Three

Lease Accounting is No Cake-Walk I remember when the Financial Accounting Standards Board issued FAS No. 13, Accounting for Leases, in November 1976. I was tasked with outlining the standard for the firm where I worked. Now, here it is in November, some 46 years later, and I’m looking at the latest rendition of the lease standard—ASC 842. When comparing the two, FAS 13 was much kinder and gentler than ASC 842, even though FAS 13 did not seem that way at the time. Under FAS 13, there were bright lines, and the accounting was more straightforward. For example, operating Read More »

A Viable GAAP Alternative?

And in This Corner – FRF for SMEs FRF for SMEs stands for Financial Reporting Framework for Small and Medium-Sized Entities. It’s a non-authoritative, non-GAAP, special-purpose accounting framework developed by the AICPA almost a decade ago. It stands in contrast to U.S. GAAP (“GAAP”) and other special-purpose frameworks, such as the income tax and cash basis of accounting, which have been used for many decades. The most appealing feature of FRF for SMEs is that it has much of the traditional look and feel of GAAP but without some more complex areas. As promoted by the AICPA, FRF for SMEs Read More »

Leases – Part Two

Other Things That Make You Go Hmmm Well, it’s here for private companies. Welcome to the universe of ASC 842. The lease standard is massive and, being a principle-based standard, leaves a lot of GAAP in gray areas. Yet, the standard is also specific, especially regarding disclosure. This blog, directed at the lessee’s accounting, is a follow-up to our May 2021 blog on leases and will focus on a few of the areas of ASC 842 that have given us some — shall we say, pause. First Things First. Before we dive into the deep gray, let’s briefly review some Read More »