Financial Reporting and Regulatory Update

Third Quarter 2021

From the FASB

Final standards

Certain leases with variable lease payments

On July 19, 2021, the FASB issued Accounting Standards Update (ASU) 2021-05, “Leases (Topic 842): Lessors – Certain Leases With Variable Lease Payments,” to improve guidance for a lessor’s accounting for lease contracts that have variable lease payments not dependent on a reference index or a rate and that would have resulted in the recognition of a selling loss at commencement if classified as a sales-type or direct financing lease. Leases that contain such variable lease payments are to be classified and accounted for as operating leases by the lessor if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would otherwise have recognized a day-one loss.

Effective dates

For all entities, the amendments are effective for fiscal years beginning after Dec. 15, 2021, including interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after Dec. 15, 2022 for all other entities. Early adoption is permitted. Entities that have not adopted Topic 842 on or before July 19, 2021, should apply the transition requirements of Topic 842. Entities that have adopted Topic 842 before July 19, 2021, have the option to apply the amendments either retrospectively or prospectively to leases that were commenced or modified on or after the adoption of Topic 842.

Amendments to SEC paragraphs

On Aug. 9, 2021, the FASB issued ASU 2021-06, “Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, ‘Amendments to Financial Disclosures About Acquired and Disposed Businesses,’ and No. 33-10835, ‘Update of Statistical Disclosures for Bank and Savings and Loan Registrants.’” This ASU amends various SEC paragraphs to reflect SEC Final Rule releases that address financial disclosures about acquired and disposed businesses and address updates of statistical disclosures for bank and savings and loan registrants.

Effective dates

This ASU was effective upon issuance on Aug. 9, 2021.


Fair value measurement of equity securities

On Sept. 15, 2021, the FASB issued a proposed ASU, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This proposal would affect all entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities.

The proposed ASU does not yet include an effective date.

Comments are due Nov. 14, 2021.