The FASB has issued a question-and-answer document in relation to lease guidance applied in Topic 840 and Topic 842 related to lease concessions that are anticipated in many instances related to the effects of the COVID-19 pandemic. Many lessors are, or will be, providing lease concessions to lessees due to business disruptions and challenges in the global economy for a significant number of lease contracts. These concessions can vary in form, with payment forgiveness and deferral of payments as possible concessions. The Q&A is a direct response to uncertainty for accounting for specific lease issues during the global pandemic.
In Topics 840 and 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. In some circumstances, a lease contract could include concession provisions for circumstances between the control of either party. If such provisions are included within the lease contract, the concessions are not accounted for as a lease modification under Topics 840 and 842. Based on these facts during the global pandemic, the FASB has provided further interpretation as an acceptable approach during the time of the COVID-19 pandemic.
The four items presented in question and answer format discuss accounting as well as disclosure issues to be considered.
The full text of the FASB Q&A is available here.
Readers should not act upon information presented without individual professional consultation.