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9.11 Effective date and transition for ASU 2021-05
Publication date: 31 Jan 2023
us Leases guide
On July 19, 2021, the FASB published ASU 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, which upon adoption requires a lessor to classify a lease with variable lease payments (that do not depend on a rate or index) as an operating lease on commencement date if classifying the lease as a sales-type or direct financing lease would result in a selling loss.
Figure LG 9-3 summarizes the effective dates for adopting ASU 2021-05. Early adoption is permitted for both public and nonpublic business entities.
Figure LG 9-3
ASU 2021-05 effective dates
ASU 2021-05 effective dates
Type of entity | Effective date |
Public business entities A not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or over-the-counter market
An employee benefit plan that files or furnishes financial statements to the SEC |
|
All other entities not included above
|
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Entities that have not yet adopted ASC 842 on or before the issuance of ASU 2021-05 (i.e., July 19, 2021) should adopt ASU 2021-05 at the same time as ASC 842 and use the same transition method used to adopt ASC 842 (i.e., adjust comparative periods with the cumulative effect of transition recognized at the beginning of the earliest period presented, or with the cumulative effect of transition recognized at the beginning of the period of adoption and no adjustment of comparative periods). See LG 9.3 for transition methods available for ASC 842.
Entities that have adopted ASC 842 on or before the issuance of ASU 2021-05 (i.e., July 19, 2021) should apply ASU 2021-05 either (1) retrospectively to leases that commenced or were modified (where the modification is not accounted for as a separate contract under ASC 842-10-25-8) on or after the adoption of ASC 842, or (2) prospectively to leases that commence or are modified (where the modification is not accounted for as a separate contract under ASC 842-10-25-8) on or after the date that an entity first applies the ASU.
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