FASB Issues Guidance on Lessor’s Accounting for Certain Leases With Variable Lease Payments

The FASB has issued Accounting Standards Update (ASU) No. 2021-05, Lessors — Certain Leases With Variable Lease Payments. The ASU requires a lessor to “classify and account for a lease with variable payments as an operating lease if (a) the lease would have been classified as a sales-type lease or a direct financing lease and (b) the lessor would have otherwise recognized a day-one loss. A day-one loss or profit is not recognized under operating lease accounting.”

For more information, see the press release on the FASB’s Web site.