FASAB Issues Statement 62, Transitional Amendment to SFFAS 54
The Federal Accounting Standards Advisory Board (FASAB) recently announced it has issued Statement of Federal Financial Accounting Standards (SFFAS) 62: Transitional Amendment to SFFAS 54.
Under the amendments, reporting entities may elect not to assess whether contracts or agreements meeting the specific 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 Statement requires 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 — depending on the end of the elected accommodation period selected — beginning Oct. 1, 2023; Oct. 1, 2024; or Oct. 1, 2025.
Leases that do not meet the “embedded leases” eligibility criteria — and those for which the accommodation is not elected — should continue to follow the implementation provisions of paragraphs 96-97 of SFFAS 54. The transitional amendments also require disclosure for reporting entities electing the accommodation.