{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/842/10/#30-initial-measurement","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"842","topic_title":"Leases","subtopic":"842-10","subtopic_title":"Overall","section":{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":"Lease Term and Purchase Options","paragraphs":[{"citation":"842-10-30-1","para":"30-1","html":"
An entity shall determine the lease term as the noncancellable period of the lease, together with all of the following:
  1. a
    Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option
  2. b
    Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option
  3. c
    Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.
","snippet":"An entity shall determine the lease term as the noncancellable period of the lease, together with all of the following:\n(a) Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4b7920dacb3715df9256ed4fbc0e372c6441aec6b7b1986b1df44462cb80ff9","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-2","para":"30-2","html":"
At the commencement date, an entity shall include the periods described in paragraph 842-10-30-1 in the lease term having considered all relevant factors that create an economic incentive for the lessee (that is, contract-based, asset-based, entity-based, and market-based factors). Those factors shall be considered together, and the existence of any one factor does not necessarily signify that a lessee is reasonably certain to exercise or not to exercise an option.
","snippet":"At the commencement date, an entity shall include the periods described in paragraph 842-10-30-1 in the lease term having considered all relevant factors that create an economic incentive for the lessee (that is, contrac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:508ac4681a173765c930589e4ef60feddd6ab89f9621ee764eb623ad7cc2b311","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-3","para":"30-3","html":"
At the commencement date, an entity shall assess an option to purchase the underlying asset on the same basis as an option to extend or not to terminate a lease, as described in paragraph 842-10-30-2.
","snippet":"At the commencement date, an entity shall assess an option to purchase the underlying asset on the same basis as an option to extend or not to terminate a lease, as described in paragraph 842-10-30-2.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:92db1618bfd0d92c497238ebb28640bde08b1507fa56191efe84616460666c58","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-4","para":"30-4","html":"
See paragraphs
842-10-55-19 through 55-21
for implementation guidance on commencement date and paragraphs
842-10-55-23 through 55-27
for implementation guidance on lease term and purchase options. See Examples 23 through 24 (paragraphs
842-10-55-210 through 55-224
) for illustrations of the requirements on purchase options.
","snippet":"See paragraphs 842-10-55-19 through 55-21 for implementation guidance on commencement date and paragraphs 842-10-55-23 through 55-27 for implementation guidance on lease term and purchase options. See Examples 23 through…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:887b73ed30f2391c6eafc833d5fc50b25bb8e83da06d9847085bb6684957837f","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fa121817b6e29be59c789cfd9e5946763c9fcb566ca9d02874f84cce24f18fe","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"block":null,"heading":"Initial Measurement of the Lease Payments","paragraphs":[{"citation":"842-10-30-5","para":"30-5","html":"
At the commencement date, the lease payments shall consist of the following payments relating to the use of the underlying asset during the lease term:
  1. a
    Fixed payments, including in substance fixed payments, less any lease incentives paid or payable to the lessee (see paragraphs
    842-10-55-30 through 55-31
    ).
  2. b
    Variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), initially measured using the index or rate at the commencement date.
  3. c
    The exercise price of an option to purchase the underlying asset if the lessee is reasonably certain to exercise that option (assessed considering the factors in paragraph 842-10-55-26).
  4. d
    Payments for penalties for terminating the lease if the lease term (as determined in accordance with paragraph 842-10-30-1) reflects the lessee exercising an option to terminate the lease.
  5. e
    Fees paid by the lessee to the owners of a special-purpose entity for structuring the transaction. However, such fees shall not be included in the fair value of the underlying asset for purposes of applying paragraph 842-10-25-2(d).
  6. f
    For a lessee only, amounts probable of being owed by the lessee under residual value guarantees (see paragraphs
    842-10-55-34 through 55-36
    ).
","snippet":"At the commencement date, the lease payments shall consist of the following payments relating to the use of the underlying asset during the lease term:\n(a) Fixed payments, including in substance fixed payments, less any …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99e586d9efdb374c8524018bb78021aa881122a5da9b9e0f4c5bcbd55d63414e","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-6","para":"30-6","html":"
Lease payments do not include any of the following:
  1. a
    Variable lease payments other than those in paragraph 842-10-30-5(b)
  2. b
    Any guarantee by the lessee of the lessor's debt
  3. c
    Amounts allocated to nonlease components in accordance with paragraphs
    842-10-15-33 through 15-42
  4. d
    Leasehold improvements recognized by a lessee and accounted for in accordance with paragraph 842-20-35-12A.
","snippet":"Lease payments do not include any of the following:\n(a) Variable lease payments other than those in paragraph 842-10-30-5(b)\n(b) Any guarantee by the lessee of the lessor's debt\n(c) Amounts allocated to nonlease componen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b09e0f61d7d94ecc4c90b683623daa37aa90fa5ba731aabf2a1922ba329869fd","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-7","para":"30-7","html":"
Paragraph 410-20-15-3(e) addresses the scope application of Subtopic 410-20 on asset retirement obligations to obligations of a lessee in connection with a lease (see paragraph 842-10-55-37).
","snippet":"Paragraph 410-20-15-3(e) addresses the scope application of Subtopic 410-20 on asset retirement obligations to obligations of a lessee in connection with a lease (see paragraph 842-10-55-37).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b6dc7b3ffd16098b7e139b7d1e7eaca5a79ed4e6fe3c6f888c7d047f24ff90f","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-8","para":"30-8","html":"
See Example 25 (paragraphs
842-10-55-225 through 55-234
) for an illustration of the requirements on lessee accounting for variable lease payments and Example 26 (paragraphs
842-10-55-235 through 55-238
) for an illustration of the requirements on termination penalties.
","snippet":"See Example 25 (paragraphs 842-10-55-225 through 55-234) for an illustration of the requirements on lessee accounting for variable lease payments and Example 26 (paragraphs 842-10-55-235 through 55-238) for an illustrati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5cda56dd358957cbb457f85cdfa7238e13ff6cc035a73a0091ea11760228baec","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-9","para":"30-9","html":"
Initial direct costs for a lessee or a lessor may include, for example, either of the following:
  1. a
    Commissions
  2. b
    Payments made to an existing tenant to incentivize that tenant to terminate its lease.
","snippet":"Initial direct costs for a lessee or a lessor may include, for example, either of the following:\n(a) Commissions\n(b) Payments made to an existing tenant to incentivize that tenant to terminate its lease.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c6267df28df72221389d6b873e3353ecd97700541697e2d3022643901569b503","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},{"citation":"842-10-30-10","para":"30-10","html":"
Costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as fixed employee salaries, are not initial direct costs. The following items are examples of costs that are not initial direct costs:
  1. a
    General overheads, including, for example, depreciation, occupancy and equipment costs, unsuccessful origination efforts, and idle time
  2. b
    Costs related to activities performed by the lessor for advertising, soliciting potential lessees, servicing existing leases, or other ancillary activities
  3. c
    Costs related to activities that occur before the lease is obtained, such as costs of obtaining tax or legal advice, negotiating lease terms and conditions, or evaluating a prospective lessee's financial condition.
","snippet":"Costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as fixed employee salaries, are not initial direct costs. The following items are examples of costs t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:952458d7a457cd599f4ab963a4a00bc1b9112b7857118ffcdd2f6d7be5ec3375","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6bee6a7e9385fcd9afcafa12f8494d8511a88d84a3198a61b9ac32013b161c18","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6de337244b8ed9206ddcc217f474fa8a3943ed78bf4fa10e37e79dd62f288921","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6de337244b8ed9206ddcc217f474fa8a3943ed78bf4fa10e37e79dd62f288921","downloaded_from":"2026-09-10T01:56:00.343Z","last_downloaded_at":"2026-09-10T01:56:00.343Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479924","source_sha256":"f114d25d5f8d09a53bf0f41c2bd4fc7b9ca58aada9488b2e1a496efeb1642223"}}