The Financial Accounting Standards Board has a proposed accounting standards update to clarify how to apply its new lease accounting standard to land easements.
Often referred to as “rights of way,” land easements govern the right to cross, access or use someone else’s land for a particular reason. Organizations use a variety of ways to account for land easements and FASB wants to clarify how they should be treated under the new leasing standard.
The lease accounting standard does provide some guidance on land easements, but it can be complicated. Some of FASB’s stakeholders have pointed out one of the requirements, to evaluate all existing land easements not previously assessed under the existing leases guidance to determine if they meet the definition of a lease under the new leases standard it released last year, would be costly and complex (for instance, because of the volume and age of those easements).
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