Making restatement optional

At their Nov. 29, 2017, meeting, the FASB decided to offer another option for transition from FAS 13 (ASC 840) to the new ASC 842 lease accounting standard. Currently lessees are required to restate all comparative years (usually two) in their financial statements according to ASC 842. This means that, for a company with a fiscal year that ends Dec. 31 (normal calendar year), the 2019 financial reports show 2017 & 2018 with leases calculated according to ASC 842: most importantly, 1/1/2017 is the date that operating leases are capitalized, so balance sheet numbers for 2017 & 2018 will show operating lease assets and liabilities.

Under the proposal that the FASB approved this week, no restatement will be required. 2017 & 2018 will be shown in the financial statements unchanged from how they were originally reported. "The effects of initially applying Topic 842 [would be] recognized as a cumulative-effect adjustment to retained earnings in the period of adoption." Based on comments from the Big 4 accounting firms, I understand this to mean that operating lessee leases are capitalized as of the beginning of fiscal 2019, with all other adjustments based on transition at that date. (UPDATE: In my original posting, I thought this meant a 2017 basis for calculating the transition, with a gain or loss recognized for the 2019 difference between assets and liabilities, but that's not what at least some commentaries are stating. When an actual Exposure Draft is released, we'll know for sure.)

I don't see the full language of the proposal online, so I'm basing this on the summary that the FASB has posted. I'll post more details as they become available.

We will update our EZLease lease accounting software to permit this option in the near future.