FASB issued a standard Monday, July 20, designed to improve the board’s lease accounting rules related to a lessor’s accounting for certain leases with variable lease payments.
Under Topic 842, Leases, a lessor may need to recognize a selling loss at lease commencement (day-one loss) for a sales-type lease with variable payments even if the lessor expects that the arrangement will be profitable overall.
The board’s new standard amends the lessor lease classification requirements. The standard requires a lessor to classify and account for a lease with variable payments as an operating lease if it meets these criteria.