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ARTICLE · 06 SEPTEMBER 2023

Accounting For Leases And Leasehold Improvements Under Common Control Arrangements

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In March 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-01, Leases (Topic 842): Common Control Arrangements.

United StatesAccounting and Audit
Kelly Buchheit
Kelly Buchheit
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In March 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-01, Leases (Topic 842): Common Control Arrangements. The ASU includes two updates. Issue 1 is a new practical expedient for entities with leasing arrangements under common control and is only available to private companies and not-for-profit (NFP) entities that are not conduit bond obligors. Issue 2 updates the accounting for leasehold improvements (LHI) and is required for all entities under common control leasing arrangements, including public companies.

BACKGROUND

ASU 2023-01 was issued by the FASB in response to concerns raised by private companies regarding the application of ASU 842 in common control leasing arrangements. Often, determining the enforceability of the terms and conditions of the leasing arrangement, even when written, can be a challenge for entities under common control since the terms may lack sufficient detail and the party who

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