The Financial Accounting Standards Board staff on Friday issued interpretative guidance in the form of a question-and-answer document addressing accounting for lease concessions related to economic effects of the coronavirus pandemic. Many lessors are providing lease concessions, such as deferred or forgiven payments, to a significant number of tenants as a result of the economic fallout from COVID-19.
FASB indicated lessors can elect whether to apply the lease modification guidance in Accounting Standards Codification Topic 842 (or Topic 840) to their lease contracts for these concessions and will not have to analyze each lease contract to determine whether enforceable rights and obligations for concessions exist. They can elect to account for the concessions as though enforceable rights and obligations for them do exist. The election is available for concessions that do not result in a substantial increase in lessor rights or lessee obligations (for example, where the total lease payments under the modified contract will be substantially the same or less than the total payments required under the original contract), which will be a matter of judgment.
