Accounting Standards Update (ASU) 2023-01, Leases (Topic 842)—Common Control Arrangements, provides a practical expedient for private companies and not-for-profit entities (NFPs) that are not conduit debt obligors to use written terms and conditions to determine if a lease exists in common control arrangements and, if a lease exists, the accounting and classification for that lease (“written terms practical expedient”).
We previously noted that qualifying entities would be incentivized to structure “month-to-month” leases to avail themselves of the short-term lease exception.