“At the end of the day, for both lessor and lessee, you may have a complete change in the accounting in terms of how you get there technically, but it doesn’t change your balance sheet or your P&L, and it only changes disclosure.

“The predominance expedient probably means that it’s just going to be treated under 606 and not 842,” said Winterscheidt. Some of the practical expedients that have a direct impact on the analysis of lease accounting for the service arrangements in the guide include short-term leases, and the separation of non-lease components for both lessees and lessors.

The leases standard includes some practical expedients that can be elected and applied by gaming businesses that are generally expected to simplify the application of ASC 842. The biggest change is we concluded that in general these would contain a lease.” We needed to really dig through whether it is or could contain a lease. But now that you’ve got the new leasing guidance, I think it’s more critical to address it because you could have differences in some of the contracting types that you may end up having on your balance sheet if you’re a lessee. “There are a number of different reasons why it wasn’t considered a lease, but the accounting would have been the same. “Historically everybody looked at that as just a service arrangement because it was generally a 90-day lease with a 30-day out, so they just accounted for it as a service arrangement because all of the fees were variable, based upon the amount of money that was put into the machine,” said Winterscheidt. The main change involves the proposed wording to address how gaming businesses would determine whether various pricing arrangements convey a lease under the new leases standard, particularly for wide area progressive slot machines. It was the accounting for wide area progressives on both sides, the lessor and lessee, and is it or is it not a lease and what the impact of that is on the revenue chapter that we have in the guide.” We needed to resolve 606, not 842, and this picks up on the last issue that we knew needed to be addressed from the task force days and carries it through and addresses it in that manner.

“We had a WAP paper on revenue recognition, and we knew that this issue was out there, but it wasn’t in the scope of the work that needed to take place at that time. “It addresses some of the things that we were going through on revenue recognition,” said AICPA FinREC Gaming Taskforce Representative Mike Winterscheidt, who is senior vice president and chief accounting officer at Scientific Games Corporation.

Accounting for casinos and gaming pdf