FASB amends risk-free discount rate expedient
Defining Issues | November 2021
Private entity practical expedient electable by class of underlying asset; interplay with implicit rate clarified.
Final amendments change and clarify the risk-free discount rate practical expedient for private entity lessees.
Applicability
ASC 842, Leases
- Private company and not-for-profit entity lessees
Relevant dates
- June 16, 2021 – Proposed ASU issued on private entity risk-free discount rate practical expedient
- July 16, 2021 – Comment deadline on proposed ASU
- September 15, 2021 – FASB affirmed amendments in the proposal, and directed the FASB staff to draft a final ASU – Tentative decisions
- November 11, 2021 – FASB issues final ASU
| Effective date of proposed amendments | Entities that adopted ASC 842 before final ASU issued | Entities that did not adopt ASC 842 before final ASU issued |
|---|---|---|
Annual periods – Fiscal years beginning after | December 15, 2021 | Adopt when the entity adopts ASC 842 |
Interim periods – In fiscal years beginning after | December 15, 2022 | |
Early adoption allowed? | Yes, as of beginning of fiscal year |
Key Impacts:
The final amendments:
- Permit private entity lessees to elect the risk-free discount rate practical expedient by class of underlying asset, instead of requiring it to be applied to all leases.
- Clarify that a lessee must still use the rate implicit in the lease when it is readily determinable even if it has elected the risk-free rate discount rate expedient.
Report contents
- Applicability
- Fast facts, impacts, actions
- Background
- Proposed amendments to the practical expedient
- Proposed effective date and transition methods
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FASB amends risk-free discount rate expedient
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Resource
Handbook: Leases
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