FASAB Issues Exposure Draft, Transitional Amendment to SFFAS 54
The Federal Accounting Standards Advisory Board (FASAB) recently announced that it is seeking input on the exposure draft (ED) of a proposed Statement of Federal Financial Accounting Standards (SFFAS) titled Transitional Amendment to SFFAS 54.
Under the proposal, reporting entities would be able to elect not to assess whether contracts or agreements meeting the eligibility criteria for “embedded leases” are or contain lease component(s) as of Oct. 1, 2023, as well as those subsequently entered into or modified prior to the end of the accommodation period. The contracts or agreements for which this accommodation is applied would be accounted for as nonlease contracts or agreements for their remaining term unless they are subsequently modified after the end of the accommodation period. The proposal would require reporting entities electing the accommodation to prospectively apply the provisions of SFFAS 54, Leases, to lease components of new or modified contracts or agreements meeting the eligibility criteria beginning Oct. 1, 2023; Oct. 1, 2024; or Oct. 1, 2025.
Leases that do not meet the “embedded leases” eligibility criteria under the proposal would continue to follow the implementation provisions of paragraphs 96-98 of SFFAS 54. The proposal would also require disclosure for reporting entities electing the accommodation.
The FASAB requests comments on the proposal by July 27, 2023. Respondents are encouraged to provide the reasons for their positions. The ED and the specific questions raised are available on the FASAB website in PDF and Word format, respectively.