FASB Issues Guidance on Discount Rate for Lessees That Are Not Public Business Entities

The FASB has issued Accounting Standards Update (ASU) No. 2021-09, Discount Rate for Lessees That Are Not Public Business Entities. Before the issuance of ASU 2021-09, ASC 842-20-30-3 permitted lessees that are not public business entities (PBEs) to “use a risk-free discount rate for the lease, determined using a period comparable with that of the lease term, as an accounting policy election for all leases” (emphasis added). ASU 2021-09 amends the current guidance in ASC 842-20-30-3 to allow a non-PBE lessee to make an accounting policy election, by class of underlying assets, to use a risk-free rate as the discount rate when the rate implicit in the lease is not readily determinable.

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