By: Andy Clemens
The Financial Accounting Standards Board (FASB) has issued revised lease accounting rules for financial institutions. These amendments clarify rental agreements between businesses with the same owner.
The Accounting Standards Update (ASU) No. 2023-01, Leases (Topic 842) Common Control Arrangements, introduces a practical expedient for private companies and non-profit organizations, simplifying lease determination and accounting treatment using written leases. Verbal leases require documentation of the unwritten terms before applying the accounting rules.
The ASU also changes the accounting treatment for leasehold improvements, requiring amortization over the useful lives to the common control group, regardless of lease term. When control is relinquished, transfer of improvements must be accounted for through equity or net asset.
Effective for fiscal years starting after December 15, 2023, early adoption is permitted. Transition approaches align with Topic 842 adoption.
Contact us for guidance on reporting common control leases and leasehold improvements under the updated rules. We’re here to help.