The Financial Accounting Standards Board (FASB) has issued post-implementation review report for its leases standard, expressing concerns over ongoing costs. 

The board said while it achieved its overall objective, the initial costs to implement the lessee requirements along with the ongoing costs to apply those requirements were significantly higher than the FASB expected at issuance. 

The report on Post-Implementation Review: Leases (Topic 842) pointed out that many organisations faced implementation costs beyond original estimates. 

The post-implementation review is a regular assessment in FASB’s standard-setting approach, designed to determine if a new accounting rule fulfils its aim by improving the quality of information for investors while balancing the costs for companies adopting it.  

Over 1,600 stakeholders from various backgrounds contributed feedback during this process. 

The insights gathered allowed FASB staff to document both the progress made during the adoption of Topic 842 and areas where future development might be improved.  

Key observations include the finding that Topic 842 provided investors and others reviewing financial statements with more detailed information about leasing activities.  

Nonetheless, expenses incurred by lessees, both at the initial stage and as part of ongoing compliance, were more substantial than expected. 

This was mainly attributed to existing internal processes and technology not being prepared for requirements such as recognising operating leases on balance sheets. 

Investors reported satisfaction with data now disclosed under lessor accounting requirements, while most lessors did not see significant costs when first implementing or maintaining compliance with these rules. 

In the opening letter, FASB chair Richard Jones and technical director Jackson Day  said: “We recognise our stakeholders’ commitment to undertake a high-quality implementation of a major accounting standard and the level of effort necessary for stakeholders of varying sizes to undertake a significant accounting change. 

“While the Leases PIR process is complete, the FASB’s work supporting the application of the leases standard is not. We will continue to monitor and, if appropriate, make improvements to the standard.”