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FASB Proposes Codification Improvements to Lessor Implementation of New Leases Standard

December 19, 2018

The Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) that would address potential lessor implementation issues related to ASU No. 2016-02, Leases (Topic 842). The proposed ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. Read more at the FASB website.