Virus-Related Rent Breaks Won’t Trigger Complex Lease Accounting

Businesses that get coronavirus-related rent concessions from their landlords don’t have to redo their lease accounting paperwork to account for these breaks, U.S. accounting rulemakers said.

Businesses can elect to skip what’s called the lease modification guidance in U.S. accounting rules to account for these rent deferrals or discounts, the staff of the Financial Accounting Standards Board published in a Q&A document Friday.

• Following the lease modification guidance in ASC 842 could be “exceedingly challenging” for businesses in the middle of the unprecedented pandemic, the document states. Businesses will be expected to offer disclosures about any material concessions.
• The document puts in writing remarks the FASB acting technical director made in a meeting April 8. It follows a request from the National Retail Federation, which told FASB that changing lease contracts to reflect new rent for storefronts and office space could trigger complex accounting rules at a time when businesses are struggling to stay afloat.
• Staff question-and-answer documents are not formal U.S. generally accepted accounting principles (GAAP) but they offer interpretations to pressing questions.
• Read This Next: Portfolio, BNA Pick, Additional Analysis on Lease Accounting