ASC 842 SEC Comment Letters

Summary and Observations as of December 2019

Our lease accounting experts reviewed ASC 842 SEC Comment Letters from the first 10 months of 2019, which was the period in which more than 90% of public companies adopted the new standard. We summarized our findings and observations in this 10-page report, which highlights the most common disclosure issues that the agency is commenting on. Data was sourced from MyLogIQ.

SEC Comment Letters ASC 842 Report Cover Image

ASC 842 SEC Comment Letters Focused on 15 Topic Areas

In total, the analysis of ASC 842 SEC comment letters identified 15 different topic areas across three primary categories: 1) lessee-specific accounting, 2) general lease accounting, and 3) sale-leaseback and other transactions.

  • Scope
  • Lease Classification
  • Discount Rates
  • Lease Incentives
  • Residual Value Guarantees
  • Short-Term Lease Expense
  • Variable Lease Expense
  • Impairments
  • Sale-Leaseback Transactions
  • Comparative Reporting
  • Divestitures
  • Intercompany Accounting

Key Findings

Two common themes emerged across all the ASC 842 SEC Comment Letters: 1) lease accounting complexity and 2) disclosure enhancement.  

  • Lease Accounting Complexity – By “accounting complexity” we mean: How did companies account for their leases, a part of a lease transaction, or an individual transaction itself? How did companies determine certain judgments and assumptions? Many of the SEC comments were requests for additional details on a company’s analyses, assumptions, judgments, and supporting documentation. 
  • Disclosure Enhancements – Topic 842 requires several enhanced and new quantitative and qualitative disclosures that were not required or are more extensive than under the previous Topic 840 standard. SEC comments included various inquiries about specific interim disclosures and requests for enhanced disclosures. Most comments were requesting more robust disclosures about the nature of leases and the significant judgments and assumptions.