FASB issues proposed ASU on narrow-scope improvements for lessors
Defining Issues | August 2018
KPMG reports on the FASB’s proposed ASU on narrow-scope improvements for lessors
KPMG reports on the FASB’s proposed ASU on narrow-scope improvements for lessors. The proposed amendments address operational issues for lessors related to sales taxes, lessee payments of lessor costs, and variable payments in contracts with lease and non-lease components.
Applicability
- Sales and other similar taxes – lessors that enter into leases that give rise to sales and other similar taxes
- Lessor costs paid by lessee – lessors with leases for which the lessee pays lessor costs
- Variable payments – lessors with variable payments in contracts with lease and non-lease components
Relevant dates
- August 13, 2018 – FASB issued proposed ASU
- September 12, 2018 – comments due on proposed ASU
Key Impacts:
The proposed ASU would:
- Add a practical expedient to permit lessors to present collections of sales and other similar taxes that arise from a specific lease transaction on a net basis
- Require that a lessor present lessor costs and payments thereof made by the lessee (directly to a third party) on a net basis when the lessor cannot readily determine those costs
- Clarify that:
- lessors should allocate variable payments between the lease and non-lease components of a lease contract based on the allocation guidance in Topic 606; and
- the timing of a lessor’s revenue recognition of the portion of such payments allocated to Topic 606 non-lease components is governed by the guidance in Topic 606
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