Staff Q&A on Topic 842<\/a> (and Topic 840) regarding lease concessions related to the pandemic.<\/p>\n\n\n\n FASB staff acknowledged the problem the pandemic brought: \u201cIt may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract.\u201d<\/p>\n\n\n\n
As a result, FASB deemed it acceptable for entities to treat any lease changes made as a result of the COVID-19 pandemic as a lease concession rather than a lease modification. Even if the enforceable rights and obligations were not in the original lease, entities don\u2019t have to go through the extra work required to treat it as a lease modification.<\/p>\n\n\n\n
Firms can treat these lease concessions as they would any other lease concession according to Topic 842 or Topic 840, depending on whether you have implemented the new lease standard yet. Entities may decide to accrue deferred payments (with lessors continuing to recognize income and lessees recognizing expenses) or to account for deferred payments as variable lease payments.<\/p>\n\n\n\n
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Making an election to account for lease concessions<\/strong><\/p>\n\n\n\nMaking this election saves the time of pouring over leases to determine whether the provision is included or requires a lease modification.<\/p>\n\n\n\n
There are two requirements to be able to make an election to an account for a lease concession rather than a lease modification:<\/p>\n\n\n\n
\u00b7 The lessee must be affected by the economic disruptions of COVID-19.<\/p>\n\n\n\n
\u00b7 The lease concessions cannot result in a substantial increase in the lessor\u2019s rights or lessee\u2019s obligations. There must be a reasonable expectation that the total payments of a modified lease contract will be the same or less than the original.<\/p>\n","protected":false},"excerpt":{"rendered":"
Ane Ohm is a CPA and CEO of LeaseCrunchane.ohm@leasecrunch.com Since the outbreak of the COVID-19 pandemic in March 2020, CPA firms are seeing a large increase in the number of clients asking about lease concessions. No one, including the Financial Accounting Standards Board (FASB), could have foreseen a global pandemic causing this much uncertainty around lease […]<\/p>\n","protected":false},"author":3,"featured_media":844,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","limit_modified_date":"","last_modified_date":"","inline_featured_image":false,"footnotes":""},"categories":[60],"tags":[],"acf":[],"yoast_head":"\n
Lease Concessions and COVID-19 - What You Need to Know | CREST Real Estate Network<\/title>\n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n \n \n\t \n\t \n\t \n