Construction Accounting – Related Party Leases
Under ASC 842, leases with related parties should be treated no differently than if they were leases with an unrelated party, except for a specific aspect of accounting for a sale-leaseback transaction. That seems straightforward, but some related-party transactions do not have legally enforceable terms and conditions because (1) they may not be formally documented and (2) the terms may not be at arms’ length.
Nevertheless, this is a big change from the previous standard. To learn more, download this Construction Issue Sheet.