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Comments on proposed codification improvements for lessors
Publication date: 15 Jan 2019
us PwC comment letter
January 15, 2019
Ms. Susan Cosper
Technical Director
Financial Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
RE: File Reference No. 2018-310
Dear Ms. Cosper,
PricewaterhouseCoopers LLP appreciates the opportunity to comment on the FASB’s Proposed Accounting Standards Update, Leases (Topic 842): Codification Improvements for Lessors.
We agree with the proposed amendments to Topic 842. The Appendix contains our detailed responses to the Questions for Respondents and an additional suggestion related to transition disclosures.
If you have any questions regarding our comments, please contact David Schmid at (973) 236-7247 or John Bishop at (973) 236-4420.
Sincerely,
PricewaterhouseCoopers LLP
________________________
PricewaterhouseCoopers LLP, 400 Campus Drive, Florham Park, NJ 07932
T: (973) 236 4000, F: (973) 236 5000, www.pwc.com
Appendix
Question 1: Should a lessor that is not a manufacturer or dealer establish fair value of the underlying asset as its cost, subject to any trade or volume discounts that apply (acknowledging that if a significant lapse of time occurs between the acquisition of the underlying asset and lease commencement, the definition of fair value must be used)? If not, please explain why.
Yes, we agree that a lessor that is not a manufacturer or dealer should establish the fair value of the underlying asset as its cost, subject to any trade or volume discounts that apply.
Question 2: Are the proposed amendments operable? If not, please explain why.
We defer to the preparer community.
Question 3: Would the proposed amendments result in a reduction of decision- useful information to users of financial statements? If so, please explain why.
No, we do not believe the proposed amendments would result in a reduction of decision- useful information.
Question 4: Should lessors that are depository and lending institutions present “principal payments received under sales-type leases and direct financing leases” in investing activities? If not, please explain why.
Yes, we believe lessors that are within the scope of ASC 942, Financial Services-Depository and Lending, should include the caption “principal payments received under sales-type leases and direct financing leases” in investing activities.
Question 5: Are the proposed amendments operable? If not, please explain why.
We defer to the preparer community.
Question 6: Would the proposed amendments result in a reduction of decision- useful information to users of financial statements? If so, please explain why.
No, we do not believe the proposed amendments would result in a reduction of decision- useful information.
Question 7: Should the effective date for all lessors within the scope of the proposed amendments be for fiscal years beginning after December 15, 2019, with early application permitted? If no, what effective date should be established and why?
Yes, the effective date for all lessors should be fiscal years beginning after December 15, 2019, with early application permitted.
Question 8: Should the proposed amendments be applied at the date that an entity first applied Topic 842 using the same transition methodology in accordance with paragraph 842-10-65-1(c)? If not, please explain why.
Yes, the proposed amendments should be applied at the date that an entity first applied Topic 842 using the same transition methodology.
Other suggested edit
We believe an additional technical correction should be made to ASC 842 to remove the requirement for entities to make the interim transition disclosure included in ASC 250-10- 50-3. ASC 842 requires an entity to apply all of the disclosures required by ASC 250, Accounting Changes and Error Corrections, in transition, except for ASC 250-10-50-1(b)(2), which addresses the annual effect (e.g., on income, net income) for the fiscal period in which a change in accounting principle is made. ASC 250-10-50-3 has the same requirement for all interim periods in the fiscal period in which a new accounting principle is adopted. We do not believe ASC 842 should require this interim disclosure in order to reduce transition costs. This would be consistent with ASC 606, Revenue from Contracts with Customers, which did not require such disclosures in either the annual or interim periods in the year of adoption.
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