Let’s take a deep dive into these relief efforts by first walking through the transition method options available under both ASC 842 and IFRS 16. Identifying the appropriate practical expedients for your company will save time, but if it is not interpreted properly, companies run the risk of errors in lease accounting. Companies can elect these relief efforts either lease by lease, by class of asset, or as an accounting policy election depending on the type of practical expedient.
What is a practical expedient?Ī practical expedient is a relief effort provided by standard setters in an effort to help preparers more easily apply accounting guidance.Īs it pertains to lease accounting, both the FASB and IASB have issued practical options to ease the adoption of the new standards. This article will address common practical expedients and other accounting relief options for those reporting under ASC 842 and those already reporting under IFRS 16. Due to the strenuous efforts often increasing the costs of implementation, the accounting boards provide support for accomplishing compliance with options to ease adoption. The journey starts with evaluating the current processes and understanding the new guidance, to then establishing the bridge for how existing and future agreements will be managed. Implementing a new standard is a difficult and time-consuming project for any organization.
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