This week’s GAAP Flash includes articles about the FASB helping you out with land easement requirements, important reminders on what to consider when planning for the adoption of ASC 842, how the new tax reform can potentially impact the tech industry, and COSO appointing a new chairman.

FASB tweaks leasing stan dard for land easements (January 25, 2018) – Accounting Today (@AccountingToday)

The FASB has issued ASU 2018-01, Leases (Topic 842) – Land Easement Practical Expedient for Transition to Topic 842, to simplify the adoption of the new leasing standard (ASC 842) as it relates to land easements. Land easements, often referred to as rights of way, represent the right to use, access, or cross someone else’s land for a specific purpose. ASC 842 requires companies to evaluate all of their land easements to see if they meet the definition of a lease, which is proving to be costly and time-consuming (and not worth it because most easements don’t meet the definition).

How It’s Relevant: As we all know, the new leasing standard is the next big adoption (effective in 2019 for public companies)! Companies have been voicing their concerns about the adoption, but the FASB is trying to ease (get it, EASEments) the process in order to help a company have a successful transition. This ASU is a great addition, which will allow companies to elect an optional practical expedient that wouldn’t require a company to reconsider its accounting for existing land easements! Here is the full text of ASU 2018-01for your reference. And if you need more references and information on implementing the new leasing standard, check out our list of accounting resources.

Tips for lease accounting implementation (January 30, 2018) – Journal of Accountancy (@AICPA_JofA)

As companies are preparing to adopt the new leasing standard (ASC 842), one theme holds true: it will take a significant amount of time to compile the information needed for adoption! This article summarizes challenges that companies are currently dealing with and provides tips on how to face those challenges going forward.

How It’s Relevant: One of the biggest challenges that companies are facing is the actual gathering of all their lease data! Finding contracts and identifying the correct information that needs to be extracted is extremely time-consuming. This article included an interesting (and important) reminder: while you may be focusing on gathering your current data, don’t forget about your future data! Meaning, make sure future lease contracts are correctly set-up in a system that will handle all the requirements and make sure other departments have been trained on what to look for going forward. I know you’re busy planning for the adoption, but don’t forget to plan for your U.S. GAAP update with GAAP Dynamics, where we will be covering all you need to know about the adoption of ASC 842.

How the tax overhaul will affect tech companie s' earnings (January 30, 2018) – The Wall Street Journal (@WSJ)

This article summarizes the potential areas of impact that the new tax legislation might have on Silicon Valley, which was a supporter of the new legislation. Over the next few weeks, year-end financial results will be analyzed to see how profits will be impacted. With the drop in the corporate tax rate from 35% to 21%, many businesses are expecting a boost in earnings, but tech companies might experience a different result.

How It’s Relevant: The four key areas that investors will be watching relate to: the amount of money that is being kept overseas (the new tax law provides an incentive to bring this money back to the U.S.); effective tax rates (which are typically lower for tech companies but will likely increase); how companies will use the money they bring back from overseas; and the possibility of decreasing borrowings (due to the influx of cash from overseas). As you can see, all four of these areas are due to the ability to bring back cash from overseas, which has been a hot button for years – check out our blog post from 2015 where we discussed this very same issue. While the overall impacts of the tax reform won’t be known for months, it will be interesting to see what unfolds over the next few weeks!

COSO names Paul Sobel as new chairman (February 1, 2018) – Accounting Today (@AccountingToday)

This week, Paul Sobel, who is the Vice President and Chief Audit Executive of Georgia-Pacific, was named the new chairman of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Mr. Sobel was part of the COSO Advisory council that provided input on the implementation of the ERM Framework, which was released in September of 2017, so he is quite familiar with the organization and how it operates.

How It’s Relevant: COSO has been busy the last few years with the release of the ERM framework and an updated internal controls framework, but don’t expect another major framework to be released anytime soon. Mr. Sobel wants to focus on issuing application guidance relating to the ERM framework, as well as shifting focus to other hot topics such as fraud risk and sustainability. He also appreciates the support he’s receiving from COSO’s sponsoring organizations so expect a successful collaboration going forward.

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