The transition from ASC 840 to ASC 842 and from IAS 17 to IFRS 16 can be a complicated and costly process. However, there are options that can help alleviate some of the burden of bringing all operating leases onto the balance sheet, including expedients and software technology.
1. How will the practical expedient selection differ under ASC 842 and IFRS 16? While similar, there are some major differences.
2. What are the pros and cons of the expedients for specific leases? Consider costs, whether leases will be classified differently under the new standards, and whether the new standards could act beneficially on the balance sheet.
3. How do different valuation options impact the accuracy of the asset measurement?
4. Can an option be applied lease-by-lease, or must it be applied to all leases?
What the Experts Think
FASB proposed an additional transition method for ASC 842 that would allow lessees to adopt the standard by recognizing a cumulative effect adjustment at the date of adoption, rather than restating comparative periods. This was officially approved July 2018.
In this document, KPMG reviews the new IFRS leasing standard and the transition options and expedients available.
KPMG reviews how the new FASB transition method will affects lessees.
This PwC document compares the transition approaches available under IFRS 16.
This PwC document provides guidance for the transition from ASC 840 to ASC 842.
PwC reviews how prior impairments and exit cost accruals can impact transition.