The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the FASB’s exposure draft, Proposed ASU No. 2020-700, Leases (Topic 842): Targeted Improvements. This proposed guidance, if adopted, would amend the current leases guidance for three issues: (1) expected losses at the inception of sales-type leases with significant variable lease payments (2) remeasurement of lease liabilities due to changes in the reference rate, and (3) partial lease terminations.
In its comment letter, the Committee states that it appreciates the FASB’s decision to address lessors’ reporting of losses upon the inception of sales-type leases that have significant variable lease payments. The Committee also agrees with the objectives of aligning Topic 842, Leases, with IFRS 16, Leases, regarding the remeasurement of lease liabilities due to a change in a reference rate (such as LIBOR) and easing the application of the guidance regarding lease modifications. The FRC, however, also provides specific recommendations regarding the amendments proposed in the exposure draft to facilitate interpretation, implementation, and meeting the FASB’s stated objectives.
READ THE LETTER