ASU 2018-11 — Leases (Topic 842): Targeted Improvements

The amendments in this Update will provide entities with an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity's reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840). An entity electing this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide.

The amendments in this Update provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

1. 1
   The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.
2. 2
   The lease component, if accounted for separately, would be classified as an operating lease.

If the nonlease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. In addition, an entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to provide certain disclosures.

This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2018-200—Leases (Topic 842)—Targeted Improvements, which has been deleted.

Issued: July 30, 2018