Chapter 16 — Effective Date and Transition

16.4 Lessor

The table below summarizes the ASU’s modified retrospective transition requirements for lessors (and assumes that the practical expedient package has not been elected).

16.4.1 Lease Classified as an Operating Lease Under Both ASC 840 and ASC 842

ASC 842-10

65-1 The following represents the transition and effective date information related to Accounting Standards Update . . . No. 2016-02, Leases (Topic 842) . . .

v. For each lease classified as an operating lease in accordance with this Topic, a lessor shall do all of the following:

1. Continue to recognize the carrying amount of the underlying asset and any lease assets or liabilities at the application date as determined in (c) as the same amounts recognized by the lessor immediately before that date in accordance with Topic 840.

2. Account for previously recognized securitized receivables as secured borrowings in accordance with other Topics.

3. If a lessor does not elect the practical expedients described in (f), write off any unamortized initial direct costs that do not meet the definition of initial direct costs in this Topic as an adjustment to equity unless the entity elects the transition method in (c)(1) and the costs were incurred after the beginning of the earliest period presented, in which case those costs shall be written off as an adjustment to earnings in the period the costs were incurred. . . .

For leases that were previously classified as operating leases and are considered operating leases under ASC 842 either because the practical expedient package was elected and lease classification therefore was not reassessed or because classification was assessed in transition to ASC 842 and the lease retained its classification as an operating lease, the lessor must continue to recognize any underlying assets and liabilities (e.g., the leased asset, deferred or accrued rent, and initial direct costs) on the later of the date of initial application or the lease commencement date. The amounts recognized should be the same as those under ASC 840. The lessor will continue to account for previously recognized securitized receivables as secured borrowings in accordance with other GAAP because operating leases are still not recognized financial assets for the lessor under ASC 842. In this transition scenario (i.e., operating lease classification was retained), the election of the practical expedient package only affects what amounts qualify as initial direct costs. If the lessor did not elect the practical expedient package, any unamortized initial direct costs that would not be capitalized under the changed definition of such costs in ASC 842 should be written off as an (1) adjustment to equity if they are incurred before the date of initial application or (2) an expense in the comparative period in which they were incurred if the lessor does not elect the Comparatives Under 840 Option.

Connecting the Dots

Effect of Hindsight Practical Expedient on Lease Term and Straight-Line Rent Revenue

The hindsight practical expedient may affect a lessor’s measurement of lease component revenue. If an entity elects hindsight, the lease may include a renewal term whose exercise was not previously considered reasonably certain (or exclude a term whose exercise is no longer reasonably certain but was deemed reasonably certain at lease commencement). When there is level rent in both the initial term and renewal term, there may be no practical effect on the measurement of lease component revenue. However, if a lessor receives uneven rent payments (e.g., escalating payments), the lessor may need to adjust its straight-line rent revenue recognized (and any lease-related balance sheet items).

Example 16-3

Hummingbird Inc., a public calendar-year-end entity, leases an office building to a tenant beginning on January 1, 2014, and receives $12,000 per annum with a 2 percent annual increase for a four-year noncancelable term as well as one four-year renewal option at a 2 percent annual increase. As of lease commencement, it is not reasonably certain that the lessee will exercise its renewal option. On January 1, 2018, the lease is renewed. Also, Hummingbird did not elect the Comparatives Under 840 Option under which it would not restate its comparative-period financial statements under ASC 842 in the period of adoption. Assume the following:

16.4.2 Lease Is a Direct Financing Lease or a Sales-Type Lease Under ASC 842 (Operating Lease Under ASC 840)

ASC 842-10

65-1 The following represents the transition and effective date information related to Accounting Standards Update . . . No. 2016-02, Leases (Topic 842) . . .

w. For each lease classified as a direct financing or a sales-type lease in accordance with this Topic, the objective is to account for the lease, beginning on the application date as determined in (c) as if it had always been accounted for as a direct financing lease or a sales-type lease in accordance with this Topic. Consequently, a lessor shall do all of the following:

1. Derecognize the carrying amount of the underlying asset at the application date as determined in (c).

2. Recognize a net investment in the lease at the application date as determined in (c) as if the lease had been accounted for as a direct financing lease or a sales-type lease in accordance with Subtopic 842-30 since lease commencement.

3. Record any difference between the amounts in (w)(1) and (w)(2) as follows:

i. If an entity elects the transition method in (c)(1), as an adjustment to equity (if the commencement date of the lease was before the beginning of the earliest period presented or if the lease was acquired as part of a business combination; see also (h)(3)) or earnings (if the commencement date of the lease was on or after the beginning of the earliest period presented).

ii. If an entity elects the transition method in (c)(2), as an adjustment to equity.

4. Account for the lease in accordance with this Topic after the application date as determined in (c). . . .

An entity that has not elected the practical expedient package must reassess the classification of its leases under ASC 842. As noted above, for leases that were previously classified as operating leases under ASC 840 but that are accounted for as direct financing leases or sales-type leases under ASC 842, an entity must “account for the lease, beginning on the application date . . . as if it had always been accounted for as a direct financing lease or a sales-type lease” (emphasis added). That is, if the lease classification changes for a lease that commenced before the date of initial application, the lessor will be required to retrospectively determine the lease balances as of lease commencement so that it can roll those balances forward to the date of initial application. As of this date, the underlying asset subject to the lease should be derecognized, a net investment in the lease should be recognized, and any difference between the two balances should be reflected as an adjustment to equity (or earnings if the lease commenced during the comparative periods and the lessor does not elect the Comparatives Under 840 Option). After the initial recognition date, the lessor should subsequently account for the lease (including any modifications) in accordance with ASC 842. See Chapter 9 for more information on the lessor’s accounting for sales-type and direct financing leases.

Example 16-4

Company B, a calendar-year-end PBE, did not elect the practical expedient package and, in transition, a lease of real estate that was classified as an operating lease under ASC 840 was determined to be a sales-type lease under ASC 842. Further, B did not elect the practical expedient that permits it not to restate its comparative-period financial statements in the period of adoption. The lease commenced in 2012. As of the date of the earliest comparative period presented, the carrying amount of the leased asset was $3 million. The net investment in the lease was determined to be $3.5 million, which represents the present value of the lease payments and unguaranteed residual value determined as of the commencement date and then rolled forward to the earliest period presented. Company B would record the following transition-related journal entry on January 1, 2017:

Connecting the Dots

Hindsight Practical Expedient May Affect Lease Classification

The hindsight practical expedient may affect a lessor’s classification test if the practical expedient package is not elected. If an entity elects hindsight, the lease may include a renewal term whose exercise was not previously considered reasonably certain (or exclude a term whose exercise is no longer reasonably certain but was deemed reasonably certain at lease inception), which could affect the lease classification. Specifically, the lease term is relevant to the determination of whether the lease term represents a major part of the remaining economic life of the asset and whether the present value of the lease payments exceeds substantially all of the fair value of the underlying asset. We believe that this is only possible if the practical expedient package is not elected. We believe that if that package is elected, it is appropriate to retain the ASC 840 classification regardless of the potential for hindsight to alter the lease term assumptions used in that lease classification.

16.4.3 Lease Classified as a Direct Financing Lease or a Sales-Type Lease Under ASC 840 (and Is Still Classified as a Direct Financing Lease or a Sales-Type Lease Under ASC 842)

ASC 842-10

65-1 The following represents the transition and effective date information related to Accounting Standards Update . . . No. 2016-02, Leases (Topic 842) . . .

x. For each lease classified as a direct financing lease or a sales-type lease in accordance with this Topic, do all of the following:

1. Continue to recognize a net investment in the lease at the application date as determined in (c) at the carrying amount of the net investment at that date. This would include any unamortized initial direct costs capitalized as part of the lessor’s net investment in the lease in accordance with Topic 840.

2. If an entity elects the transition method in (c)(1), before the effective date, a lessor shall account for the lease in accordance with Topic 840.

3. Regardless of the transition method selected in (c), beginning on the effective date, a lessor shall account for the lease in accordance with the recognition, subsequent measurement, presentation, and disclosure guidance in Subtopic 842-30.

4. Beginning on the effective date, if a lessor modifies the lease (and the modification is not accounted for as a separate contract in accordance with paragraph 842-10-25-8), it shall account for the modified lease in accordance with paragraph 842-10-25-16 if the lease is classified as a direct financing lease before the modification or paragraph 842-10-25-17 if the lease is classified as a sales-type lease before the modification. A lessor shall not remeasure the net investment in the lease on or after the effective date unless the lease is modified (and the modification is not accounted for as a separate contract in accordance with paragraph 842-10-25-8). . . .

As noted above, if the lease was classified as a direct financing lease or a sales-type lease under ASC 840 and continues to be classified as a direct financing lease or a sales-type lease under ASC 842, the lessor should “[c]ontinue to recognize a net investment in the lease at the application date . . . at the carrying amount of the net investment at that date.” In other words, the lessor should generally carry over its ASC 840 accounting during the transition period. The only exception to this general rule concerns initial direct costs. If the lessor does not elect the practical expedient package, any unamortized initial direct costs not capitalizable under ASC 842 must be written off to equity (if the lease commenced before the date of initial application) or earnings in the comparative period in which they were incurred, which is only applicable if the lessor does not elect the Comparatives Under 840 Option.

The lessor should subsequently measure the lease (including modifications) during the transition period in accordance with ASC 840. Beginning on the effective date, the lessor should apply the subsequent measurement, presentation, and disclosure guidance in ASC 842-30 as well as the modification guidance in ASC 842-10-25 (see Section 9.3.4 for guidance on modifications).

Connecting the Dots

Impact of Hindsight on Lease Classification and Measurement of Direct Financing Leases or Sales-Type Leases

The use of hindsight may affect the lease term and, in turn, the measurement of direct financing or sales-type leases, because a different lease term will typically result in different lease payments with respect to determining the net investment in the lease.

Note that the use of hindsight will not affect lease classification if the lessor applies the practical expedient package, because that election precludes a reassessment of ASC 840 lease classification determinations.

16.4.4 Lease Is an Operating Lease Under ASC 842 (Direct Financing or Sales-Type Lease Under ASC 840)

ASC 842-10

65-1 The following represents the transition and effective date information related to Accounting Standards Update . . . No. 2016-02, Leases (Topic 842) . . .

y. For each lease classified as an operating lease in accordance with this Topic, the objective is to account for the lease, beginning on the application date as determined in (c), as if it had always been accounted for as an operating lease in accordance with this Topic. Consequently, a lessor shall do all of the following:

1. Recognize the underlying asset at what the carrying amount would have been had the lease been classified as an operating lease under Topic 840.

2. Derecognize the carrying amount of the net investment in the lease.

3. Record any difference between the amounts in (y)(1) and (y)(2) as follows:

i. If an entity elects the transition method in (c)(1), as an adjustment to equity (if the commencement date of the lease was before the beginning of the earliest period presented or if the lease was acquired as part of a business combination) or earnings (if the commencement date of the lease was on or after the beginning of the earliest period presented).

ii. If an entity elects the transition method in (c)(2), as an adjustment to equity.

4. Subsequently account for the operating lease in accordance with this Topic and the underlying asset in accordance with other Topics. . . .

An entity that has not elected the practical expedient package must reassess lease classification under ASC 842. For leases previously classified as sales-type or direct financing leases under ASC 840 that are operating leases upon the adoption of ASC 842, the lessor should perform the steps in ASC 842-10-65-1(y) above. Further, as discussed in the Q&A below, although this transition guidance does not specifically address other lease-related balances, we believe that the broad objective would apply to all balances that would have otherwise been recognized had the lease always been accounted for as an operating lease.

Q&A 16-6 Accounting for Other Lease-Related Balances When Transitioning From a Direct Financing Lease or Sales-Type Lease to an Operating Lease

Example

On October 1, 2010, Company A acquired an office building that had various leases in place; as a result, A became a lessor of office space. The lease agreements with the existing tenants included escalating lease payments over the contract period. On the basis of the lease classification criteria in ASC 840, A determined that the existing leases should be classified as direct financing leases. Therefore, on the acquisition date, A recognized a net investment in the leases and accounted for them in accordance with ASC 840.

On January 1, 2019, A adopts ASC 842 and does not elect the practical expedients in ASC 842-10-65-1(f) or the Comparatives Under 840 Option. As a result, A evaluates the classification criteria in ASC 842 and concludes that its existing direct financing leases should be classified as operating leases under ASC 842. Such an outcome could arise for various reasons, including use of hindsight that results in a different assumption regarding the lease term.

Assume that the lease had been classified as an operating lease in accordance with ASC 840. As a result of the rent escalations in the lease agreement, A then would have recognized a “straight-line rent receivable” of $25,000 as of the earliest period presented. Similarly, as of lease commencement, A would have recognized an in-place lease intangible, net of amortization, of $55,000, which represents the inherent value associated with full occupancy of the property by tenants on the acquisition date.

Question

Should A recognize the straight-line rent receivable and the in-place lease intangible asset when the lease’s classification changes from a direct financing lease under ASC 840 to an operating lease under ASC 842?

Answer

Yes. The straight-line rent receivable and the in-place lease intangible should be established in transition as if they had always been recorded in connection with the operating lease.

The transition method in ASC 842 is not a full retrospective approach. However, the objective under ASC 842-10-65-1(y) is to account for a lease as if it had always been accounted for as an operating lease in accordance with ASC 842. Therefore, while the transition guidance discusses only certain balances (e.g., the recognition of the underlying asset at what the carrying amount would have been had the lease been classified as an operating lease under ASC 840), we believe that the guidance is not intended to be all-inclusive and that the broad objective would apply to all balances that would have otherwise been recognized had the lease always been accounted for as an operating lease.

Straight-Line Rent Receivable

On the basis of the analysis above, when A transitions to ASC 842, it should do the following as of the beginning of the earliest period presented (i.e., January 1, 2017):

Derecognize the net investment in the lease.
Recognize the underlying asset at what its carrying amount would have been if the lease were always accounted for as an operating lease under ASC 840.
Recognize a straight-line rent receivable balance in the amount at which it would have been recorded if the lease was always accounted for as an operating lease under ASC 842 (i.e., $25,000, which is the build-up of a straight-line rent receivable from lease commencement to the earliest period presented when A makes the transition to ASC 842).

In addition, A should recognize any resulting difference as an adjustment to opening equity and subsequently account for the operating lease in accordance with ASC 842.

In-Place Lease Intangible

Company A should apply the guidance in ASC 805-20-25-10A and recognize an in-place lease intangible as of January 1, 2017 (i.e., the beginning of the earliest period presented). That is, A should determine what the in-place lease intangible would have been as of October 1, 2010 (the date of initial acquisition), and factor in amortization of the intangible through January 1, 2017, the beginning of the earliest year presented. The resulting amount would be the in-place lease intangible amount that would have been recognized if the lease had always been accounted for as an operating lease. Company A should recognize an in-place lease intangible of $55,000 and amortize it over the remaining lease term.

The response to this question was informally discussed with the FASB staff, which agreed with the overall conclusion reached.

Connecting the Dots

Principle Related to Accounting for the Operating Lease in Transition

Although the scenario in the example above may not be common for many entities upon transition, we believe that the principle outlined therein — account for the operating lease in transition as if it had always been an operating lease — is critical. Specifically, we think that it is important to consider the objective of the transition guidance in each relevant paragraph of ASC 842-10-65-1.

For example, while ASC 842-10-65-1(h) describes the applicability of the guidance as depending on whether “an entity has previously recognized an asset or a liability in accordance with Topic 805 on business combinations relating to favorable or unfavorable terms of an operating lease acquired as part of a business combination,” we believe that it would be similarly necessary to consider and carry forward other lease-related balances that would have been recognized, such as in-place lease intangibles.

16.4.5 Leveraged Leases

ASC 842-10

65-1 The following represents the transition and effective date information related to Accounting Standards Update . . . No. 2016-02, Leases (Topic 842) . . .

z. For leases that were classified as leveraged leases in accordance with Topic 840, and for which the commencement date is before the effective date, a lessor shall apply the requirements in Subtopic 842-50. If a leveraged lease is modified on or after the effective date, it shall be accounted for as a new lease as of the effective date of the modification in accordance with the guidance in Subtopics 842-10 and 842-30.

1. A lessor shall apply the pending content that links to this paragraph to a leveraged lease that meets the criteria in (z) that is acquired in a business combination or an acquisition by a not-for-profit entity on or after the effective date. . . .

Leveraged lease accounting is a special type of accounting that a lessor can apply under ASC 840 for certain direct financing leases that meet specific criteria (see ASC 840-10-25-43(c)). The unique economic effect of leveraged lease accounting stems from a combination of nonrecourse financing and a cash flow pattern that typically enables the lessor to recover its investment in the early years of the lease (as a result of tax benefits generated by depreciation, interest, and ITC deductions) and, thereafter, affords it the temporary use of funds from which additional income can be derived.

The accounting for leveraged leases is complex but is based on two basic premises:

The lessor’s balance sheet reflects the lessor’s equity in the property on an after-tax basis, net of the related debt.
The lessor’s income statement reflects an after-tax constant rate of return on the lessor’s net investment. During periods in which the net investment is zero or below zero, no income is recognized.

Although ASC 842 removed leveraged lease accounting, leases that met the definition of a leveraged lease under ASC 840 and commenced before the effective date of ASC 842 are grandfathered in and are addressed in ASC 842-50 (see Section 9.5). A leveraged lease that is modified on or after the effective date (including an extension option whose exercise was not previously reasonably assured) must be accounted for as a new lease in accordance with ASC 842 (i.e., because leveraged lease accounting has been discontinued).

16.4.6 Leases for Which a Lessor Elects the Practical Expedient Related to Not Separating Lease and Nonlease Components

ASC 842-10

65-2 The following represents the transition and effective date information related to Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements:

An entity that has not yet adopted the pending content that links to paragraph 842-10-65-1 shall apply the pending content that links to paragraph 842-10-65-2, by class of underlying asset, to all new and existing leases when the entity first applies the pending content that links to paragraph 842-10-65-1 and shall apply the same transition method elected for the pending content that links to paragraph 842-10-65-1.
An entity that has adopted the pending content that links to paragraph 842-10-65-1 shall apply the pending content that links to this paragraph, by class of underlying asset, to all new and existing leases either:
1. In the first reporting period following the issuance of the pending content that links to paragraph 842-10-65-2
2. At the original effective date of this Topic for that entity as determined in paragraph 842-10-65-1(a) and (b).
An entity that has adopted the pending content that links to paragraph 842-10-65-1 shall apply the pending content that links to this paragraph, by class of underlying asset, to all new and existing leases either:
1. Retrospectively to all prior periods beginning with the fiscal years in which the pending content that links to paragraph 842-10-65-1 was initially applied
2. Prospectively.

In July 2018, the FASB issued ASU 2018-11, which provided a practical expedient under which lessors can elect, by class of underlying asset, not to separate lease and nonlease components when certain criteria are met. The effective date of ASU 2018-11 was aligned with that of ASU 2016-02.23

Entities that early adopted ASU 2016-02 before the issuance of ASU 2018-11 could apply the lessor practical expedient to all new and existing leases either retrospectively or prospectively and could elect to apply it as of either (1) the lessor’s first reporting period (interim or annual) after the issuance of ASU 2018-11 or (2) the mandatory effective date of ASC 842 (i.e., January 1, 2019, for calendar-year-end public entities). For example, an entity that early adopted ASU 2016-02 and elected the practical expedient may have decided not to recast past periods already presented under ASC 842, thereby choosing prospective application. However, from its date of initial application forward, the election would apply to all existing and new leases.

A lessor electing the practical expedient would be required to apply it to all new and existing transactions within a class of underlying assets that qualify for the expedient as of the date elected. That is, a lessor would not be permitted to apply the practical expedient only to new or modified transactions within a class of underlying assets. (See Sections 4.3.3.2 and 17.3.1.4.2 for further discussion of this practical expedient.)

16.4.7 ASU 2018-20 on Narrow-Scope Improvements for Lessors

ASC 842-10

65-3 The following represents the transition and effective date information related to Accounting Standards Update No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors:

An entity that has not yet adopted the pending content that links to paragraph 842-10-65-1 shall apply the pending content that links to this paragraph [842-10-65-3] to all new and existing leases when the entity first applies the pending content that links to paragraph 842-10-65-1 and shall apply the same transition method elected for the pending content that links to paragraph 842-10-65-1.
An entity that has adopted the pending content that links to paragraph 842-10-65-1 before the issuance of the pending content that links to this paragraph shall adopt the pending content that links to this paragraph to all new and existing leases at the original effective date of this Topic for that entity as determined in paragraph 842-10-65-1(a) through (b). Alternatively, an entity that has adopted the pending content that links to paragraph 842-10-65-1 may adopt the pending content that links to this paragraph to all new and existing leases either:
1. In the first reporting period ending after the issuance of the pending content that links to this paragraph
2. In the first reporting period beginning after the issuance of the pending content that links to this paragraph
An entity that has adopted the pending content that links to paragraph 842-10-65-1 before the issuance of the pending content that links to this paragraph shall apply the pending content that links to this paragraph to all new and existing leases either:
1. Retrospectively to all prior periods beginning with the fiscal years in which the pending content that links to paragraph 842-10-65-1 was initially applied
2. Prospectively.

In December 2018, the FASB issued ASU 2018-20, which addresses certain requests made by stakeholders regarding implementation issues associated with ASU 2016-02, specifically the accounting for the following by lessors:

“Sales taxes and other similar taxes collected from lessees.”
Lessor costs paid by a lessee directly to a third party.
“Recognition of variable payments for contracts with lease and nonlease components.”

See Section 17.3.1.5 for detailed discussion of this ASU.

The effective date of ASU 2018-20 was aligned with that of ASU 2016-02.

If an entity had already adopted ASU 2016-02 as of the date of issuance of ASU 2018-20, the entity could adopt ASU 2018-20 by using the mandatory effective dates of ASU 2016-02. Alternatively, an entity could elect to apply ASU 2018-20 as of either (1) the first reporting period ending after the issuance of the ASU or (2) the first reporting period beginning after the issuance of the ASU. In addition, entities that elected to early adopt the ASU could apply it either (1) prospectively or (2) retrospectively to all prior periods beginning with the fiscal years in which ASC 842 was initially applied.

All entities should consistently apply the amendments to all leases existing as of the date on which ASU 2018-20 is initially applied and to new leases entered into after that date.

16.4.8 ASU 2019-01 on Codification Improvements

ASC 842-10

65-4 The following represents the transition and effective date information related to Accounting Standards Updates No. 2019-01, Leases (Topic 842): Codification Improvements, No. 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and No. 2020-05, Revenue From Contracts With Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities:

All entities within the scope of paragraph 842-10-65-1(a) shall apply the pending content that links to this paragraph for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years (with an exception for those entities that have not yet issued their financial statements or made financial statements available for issuance as described in the following sentence). A not-for-profit entity that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market that has not yet issued financial statements or made financial statements available for issuance as of June 3, 2020 shall apply the pending content that links to this paragraph for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. All other entities shall apply the pending content that links to this paragraph for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted.
An entity shall apply the pending content that links to this paragraph as of the date that it first applied the pending content that links to paragraph 842-10-65-1 and shall apply the same transition method elected for the pending content that links to paragraph 842-10-65-1 in accordance with paragraph 842-10-65-1(c).

In March 2019, the FASB issued ASU 2019-01, which makes Codification improvements related to the following three issues under ASC 842:

Determination of the fair value of the underlying asset by lessors that are not manufacturers or dealers.
Presentation in the statement of cash flows for sales-type and direct financing leases by lessors within the scope of ASC 942.
Clarification of interim disclosure requirements during transition.

See Section 17.3.1.7 for detailed discussion of this ASU.

The ASU became effective for (1) public companies for fiscal years beginning after December 15, 2019, and interim periods therein; (2) public NFP entities (that have not issued or made financial statements available for issuance as of June 3, 2020) for fiscal years beginning after December 15, 2019, and interim periods therein; and (3) all other entities for fiscal years beginning after December 15, 2021, and interim periods beginning after December 15, 2022. Early adoption was permitted.

All entities should consistently apply the transition method elected for ASU 2016-01 and its subsequent amendments when adopting the guidance in this ASU.

Footnotes

ASU 2019-10 delayed the effective date of ASU 2016-02 for all nonpublic companies. ASU 2020-05 further delayed the effective date for all nonpublic companies as well as for certain public NFPs. (See further discussion in Section 16.1.) The new effective date for nonpublic companies was annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The effective date for public NFPs that qualify for the deferral under ASC 842-10-65-1(a) was annual periods beginning after December 15, 2019, and interim periods therein. The effective date for all other public companies remained unchanged. The delayed effective date for nonpublic companies also applied to all other ASUs associated with ASU 2016-02.

Confidential and Proprietary — for Use Solely by Authorized Personnel

This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.