The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2018-01, Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842. The purpose of the ASU is to clarify the application of the FASB Accounting Standards Codification™ Topic 842, Leases, the new leases guidance, to land easements. It also eases adoption efforts for some land easements.
A land easement involves the right to use, access, or cross another entity’s land for a specified purpose. Such easements are often referred to as ‘rights of way’. Utility companies and telecommunications companies, for example, use land easements to take a small strip of land, or easement, to bury wires. Historically, not all of these companies have accounted for land easements as leases, resulting in diversity in practice.
Stakeholders that do not use the current leases guidance with respect to their land easements have advised the FASB that the requirement to evaluate all expired and existing land easements to determine whether they meet the definition of a lease under the new standard could be expensive. They also noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognised on the balance sheet.
ASU 2018-01 provides relief by:
- Providing entities an optional transition practical expedient that, if elected, would not require an organisation to reconsider its accounting for existing land easements that are not currently accounted for under the old leases standard
- Clarifying that new or modified land easements should be evaluated under the new leases standard once an entity has adopted the new standard.
The FASB issued its new lease accounting guidance in ASU 2016-02, Leases (Topic 842), in February 2016. The new standard is effective for public business entities for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years (that is, 1 January 2019, for a calendar year entity). Other organisations should apply the amendments for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Early application is permitted for all entities.
The effective date and transition requirements for ASU 2018-01 are the same as those in ASU 2016-02.
ASU 2018-01 is available on this link. http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176169927843&acceptedDisclaimer=true
FASB Issues Staff Q&A Documents on Tax Cuts and Jobs Act
The US Financial Accounting Standards Board (FASB) has issued Staff Questions and Answers (Q&A) guidance addressing financial accounting and reporting implementation issues related to the US Tax Cuts and Jobs Act (Tax Act) adopted in late December 2017.
The FASB initially issued a Staff Q&A document on whether private companies and not-for-profit organisations can apply US Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 118 (Topic 5.EE, Income Tax Accounting Implications of the Tax Cuts and Jobs Act). As discussed in the Q&A, if a private company or not-for-profit organisation applies SAB 118, it would be in compliance with GAAP.
The second set of Staff Q&As also discusses implementation issues related to the Tax Act. These Staff Q&As provides guidance on the following topics:
- Whether to discount the tax liability on the deemed repatriation
- Whether to discount alternative minimum tax credits that become refundable
- Accounting for the base erosion anti-abuse tax
- Accounting for global intangible low-taxed income.
The Staff Q&As are available on this link. http://www.fasb.org/taxcutsjobsact#section_3
The FASB has provided a web page on the Tax Act, which is available on this link. http://www.fasb.org/taxcutsjobsact#section_1
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