Accounting Standards Updates of Leases

Accounting Standards Updates of Leases
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January 31, 2019
* Answer the following questions
* What is the issue?
In the article written by Drew (2018), entitled “FASB tweaks leases standard with new update,” he talked about the Accounting Standards Update (ASU) when it comes to reporting leases standards. This includes changes in “accounting for sales taxes, certain lessor costs, and certain requirements related to variable payments in contracts” (Drew, 2018). The main issue in this article is the fact that the application of these new lease standards for accounting could cause inaccuracy in financial statements. Indeed these changes could be daunting for lessors, especially as they have limited workforce and resources. In the article, written by Gordon and Granlund (2018), they noted the potential difficulties of applying the new standards for reporting, especially for organizations (or individuals) that have limited workforce and resources. This also places the lessors in a problematic situation, because of the said factors leading to difficulties.
* What are the proposed remedies?
In order to remedy these difficulties, the ASU has noted that lessors should be allowed to account for certain costs, such as sales taxes, and place them under the heading of ‘lessee costs’ in their financial reports. In turn, this would allow them to remove the said item by excluding “them from being reported as lease revenue with an associated expense” (Drew, 2018). Another remedy that could help in reducing the difficulty of reporting is the removal of costs between lessees and third-parties when reporting revenue. By changing how these variable payments are recorded, the number of items could be reduced in the financial statements, thereby reducing the risks of errors in the report. Aside from those already stated above, the ASU also included a new wa...