# ASC 842-20-25: Leases — Lessee — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/20/#25-recognition) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:5499017552d3b6fbd32a146c420d3e2ed3ede345043089c88e5dc188fcb2125b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/842/20/#25-recognition) SEC content: no ##### [842-20-25-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:ef3d7f440b1af531f868b9e8d2ebe9124cbdaa3d5414aa83746417c178198722 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the [commencement date](https://asc.understandingaccounting.org/glossary/c/#commencement-date-of-the-lease-commencement-date "The date on which a lessor makes an underlying asset available for use by a lessee. See paragraphs 842-10-55-19842-10-55-20842-10-55-21 for implementation guidance on the commencement date."), a [lessee](https://asc.understandingaccounting.org/glossary/l/#lessee "An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.") shall recognize a [right-of-use asset](https://asc.understandingaccounting.org/glossary/r/#right-of-use-asset "An asset that represents a lessee's right to use an underlying asset for the lease term.") and a [lease liability](https://asc.understandingaccounting.org/glossary/l/#lease-liability "A lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis."). #### Short-Term Leases ##### [842-20-25-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:9014aa9c1f9fa325b0d9d486c57aac8c6ec2f04666bc3d5531d8564d0fa5b757 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As an accounting policy, a [lessee](https://asc.understandingaccounting.org/glossary/l/#lessee "An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.") may elect not to apply the recognition requirements in this Subtopic to [short-term leases](https://asc.understandingaccounting.org/glossary/s/#short-term-lease "A lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise."). Instead, a lessee may recognize the [lease payments](https://asc.understandingaccounting.org/glossary/l/#lease-payments "See paragraph 842-10-30-5 for what constitutes lease payments from the perspective of a lessee and a lessor.") in profit or loss on a straight-line basis over the [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.") and [variable lease payments](https://asc.understandingaccounting.org/glossary/v/#variable-lease-payments "Payments made by a lessee to a lessor for the right to use an underlying asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.") in the period in which the obligation for those payments is incurred (consistent with paragraphs [842-20-55-1 through 55-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-1) ). The accounting policy election for short-term leases shall be made by class of [underlying asset](https://asc.understandingaccounting.org/glossary/u/#underlying-asset "An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.") to which the right of use relates. ##### [842-20-25-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:b27e44885dd33d3b55f6e9e7a70b2a26a49709a33cbbb9573ad13d8b7a1f740c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the lease term or the assessment of a lessee option to purchase the underlying asset changes such that, after the change, the remaining lease term extends more than 12 months from the end of the previously determined lease term or the lessee is reasonably certain to exercise its option to purchase the underlying asset, the lease no longer meets the definition of a short-term lease and the lessee shall apply the remainder of the guidance in this Topic as if the date of the change in circumstances is the [commencement date](https://asc.understandingaccounting.org/glossary/c/#commencement-date-of-the-lease-commencement-date "The date on which a lessor makes an underlying asset available for use by a lessee. See paragraphs 842-10-55-19842-10-55-20842-10-55-21 for implementation guidance on the commencement date."). ##### [842-20-25-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:93b38f2f3e8a884662a329007c1fae114679e00ef1cdb76a9ffa7e7eaad2cb95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1 (paragraphs [842-20-55-13 through 55-16](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-13) ) for an illustration of the requirements on short-term leases. #### Finance Leases ##### [842-20-25-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:a7b260a0fb8a45dd261229a6cf0172fca0c1b198367cefa6fd464bca60ed1740 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the [commencement date](https://asc.understandingaccounting.org/glossary/c/#commencement-date-of-the-lease-commencement-date "The date on which a lessor makes an underlying asset available for use by a lessee. See paragraphs 842-10-55-19842-10-55-20842-10-55-21 for implementation guidance on the commencement date."), a [lessee](https://asc.understandingaccounting.org/glossary/l/#lessee "An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.") shall recognize in profit or loss, unless the costs are included in the carrying amount of another asset in accordance with other Topics: 1. a Amortization of the [right-of-use asset](https://asc.understandingaccounting.org/glossary/r/#right-of-use-asset "An asset that represents a lessee's right to use an underlying asset for the lease term.") and interest on the [lease liability](https://asc.understandingaccounting.org/glossary/l/#lease-liability "A lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis.") 2. b [Variable lease payments](https://asc.understandingaccounting.org/glossary/v/#variable-lease-payments "Payments made by a lessee to a lessor for the right to use an underlying asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.") not included in the lease liability in the period in which the obligation for those payments is incurred (see paragraphs [842-20-55-1 through 55-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-1) ) 3. c Any impairment of the right-of-use asset determined in accordance with paragraph [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9). #### Operating Leases ##### [842-20-25-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:cf52d49ee71aaa210cc3ad0500583574ff23bec1afb9fd534f537311dee14c39 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the [commencement date](https://asc.understandingaccounting.org/glossary/c/#commencement-date-of-the-lease-commencement-date "The date on which a lessor makes an underlying asset available for use by a lessee. See paragraphs 842-10-55-19842-10-55-20842-10-55-21 for implementation guidance on the commencement date."), a [lessee](https://asc.understandingaccounting.org/glossary/l/#lessee "An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.") shall recognize all of the following in profit or loss, unless the costs are included in the carrying amount of another asset in accordance with other Topics: 1. a A single lease cost, calculated so that the remaining cost of the [lease](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") (as described in paragraph [842-20-25-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-8)) is allocated over the remaining [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.") on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which benefit is expected to be derived from the right to use the [underlying asset](https://asc.understandingaccounting.org/glossary/u/#underlying-asset "An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.") (see paragraph [842-20-55-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-3)), unless the [right-of-use asset](https://asc.understandingaccounting.org/glossary/r/#right-of-use-asset "An asset that represents a lessee's right to use an underlying asset for the lease term.") has been impaired in accordance with paragraph [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9), in which case the single lease cost is calculated in accordance with paragraph [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7) 2. b [Variable lease payments](https://asc.understandingaccounting.org/glossary/v/#variable-lease-payments "Payments made by a lessee to a lessor for the right to use an underlying asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.") not included in the [lease liability](https://asc.understandingaccounting.org/glossary/l/#lease-liability "A lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis.") in the period in which the obligation for those payments is incurred (see paragraphs [842-20-55-1 through 55-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-1) ) 3. c Any impairment of the right-of-use asset determined in accordance with paragraph [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9). ##### [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:44a011a9c30128e630f01173326dd8605fdaa08d1e4c40fe7a1cdf898531460e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After a right-of-use asset has been impaired in accordance with paragraph [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9), the single lease cost described in paragraph [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) shall be calculated as the sum of the following: 1. a Amortization of the remaining balance of the right-of-use asset after the impairment on a straight-line basis, unless another systematic basis is more representative of the pattern in which the lessee expects to consume the remaining economic benefits from its right to use the underlying asset 2. b Accretion of the lease liability, determined for each remaining period during the lease term as the amount that produces a constant periodic discount rate on the remaining balance of the liability. ##### [842-20-25-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:38.192Z to 2026-09-10T01:56:38.192Z Record version: sha256:140f84f80149153255ba53ff121900f3f4ce1d03a228fb7a567ac2b5e5c89e04 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Throughout the lease term, the remaining cost of an [operating lease](https://asc.understandingaccounting.org/glossary/o/#operating-lease "From the perspective of a lessee, any lease other than a finance lease. From the perspective of a lessor, any lease other than a sales-type lease or a direct financing lease.") for which the right-of-use asset has not been impaired consists of the following: 1. a The total [lease payments](https://asc.understandingaccounting.org/glossary/l/#lease-payments "See paragraph 842-10-30-5 for what constitutes lease payments from the perspective of a lessee and a lessor.") (including those paid and those not yet paid), reflecting any adjustment to that total amount resulting from either a remeasurement in accordance with paragraphs [842-10-35-4 through 35-5](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-4) or a [lease modification](https://asc.understandingaccounting.org/glossary/l/#lease-modification "A change to the terms and conditions of a contract that results in a change in the scope of or the consideration for a lease (for example, a change to the terms and conditions of the contract that adds or terminates the right to use one or more underlying assets or extends or shortens the contractual lease term)."); plus 2. b The total [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained.") attributable to the lease; minus 3. c The periodic lease cost recognized in prior periods.