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ASC 842 — Leases

ASC 842, Leases, was added by ASU 2016-02 on February 25, 2016. It is effective for public business entities for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein. For all other entities, ASC 842 will be effective for annual periods beginning after December 15, 2019 (i.e., calendar periods beginning on January 1, 2020), and interim periods thereafter. Early adoption will be permitted for all entities.

Related resources

See our comprehensive collection of news and publications related to leases.

International guidance

For the IASB's updated guidance on leases, see IFRS 16, Leases.

Overview

The full text of ASC 842 can be found in the FASB Accounting Standards Codification (link to the FASB's Web site; registration required). Also, the full text of the Codification and Deloitte-authored Q&As related to the Codification are available in the Deloitte Accounting Research Tool (DART) Web site (subscription required).

ASC 842 provides the requirements of financial accounting and reporting for lessees and lessors and comprises five Subtopics (Overall, Lessee, Lessor, Sale and Leaseback Transactions, and Leveraged Leases Arrangements). Below is an overview of each Subtopic.

842-10 Overall

ASC 842-10 details the scope of the leases guidance and specifies the accounting for leases that fall within the scope of ASC 842. The objective of this Subtopic is "to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease."

842-20 Lessee

ASC 842-20 specifies the proper accounting by lessees of leases classified as short-term leases, finance leases, or operating leases. In general, a lessee should recognize a right-of-use asset and a lease liability for each lease. However, a lessee may elect not to apply the recognition requirements to short-term leases, and instead recognize the lease payments over the lease term.

842-30 Lessor

ASC 842-30 specifies the proper accounting by lessors of leases classified as sales-type leases, direct financing leases, or operating leases. For sales-type and direct financing leases, the lessor should derecognize the underlying asset and recognize or defer additional profits and expenses associated with the lease. For operating leases, the lessor should defer initial direct costs at commencement of the lease and recognize lease payments and initial direct costs over the lease term.

842-40 Sale and Leaseback Transactions

ASC 842-40 specifies the accounting for sale and leaseback transactions where an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor) and leases that asset back from the buyer-lessor.

842-50 Leveraged Lease Arrangements

ASC 842-50 specifies the accounting for leases that meet the definition of leveraged leases in the previous leases guidance in ASC 840.

Content from the FASB Accounting Standards Codification® included at http://www.usgaapplus.com is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.

FASB Accounting Standards Updates

The following ASUs amended the guidance in this Topic:

Proposed FASB Accounting Standards Updates

The following are proposed amendments to ASC 842:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.