For lessors, the proposed changes would amend the classification requirements for leases in which the lease payments are mostly variable by requiring lessors to classify and account for those leases as operating leases. In doing so, FASB said the risk of lessors recognizing losses at the start of the lease for sales-type leases that are expected to be profitable would be mitigated by the improvements in the standard. FASB believes the resulting financial reporting would more faithfully represent the underlying economics of the lease.
For lessees, the amendments would offer the option to remeasure lease liabilities for changes in a reference index or a rate affecting future lease payments at the date those changes take effect. This option would be available as an entity-wide accounting policy election.