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 »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 »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 »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 »We Are Required To Talk With Each Other It happens. From time to time, company management will decide to replace their current auditor. It can be for good reasons, wrong reasons, or no real reason at all. The predecessor auditor may be a repository of information that may be important to a potential successor auditor. Therefore, auditing standards require that before a new auditor can accept the engagement, they must inquire about certain matters of the predecessor auditor. In June 2022, the Auditing Standards Board of the AICPA issued Statement on Auditing Standards 147, Inquiries of the Predecessor Auditor Regarding
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