# ASC 842-20-30: Leases — Lessee — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/20/#30-initial-measurement) 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): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:7f4378b2ab0b99e58c22a177fa101b942fa18bf3ad7953a7cd6878ca2c053871 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/842/20/#30-initial-measurement) SEC content: no ##### [842-20-30-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:5ccfc5b095bdccd18b0a404ab218c24d6c5c560220f36c2fb05abd156b84eed8 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 measure both of the following: 1. a 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.") at the present value of 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.") not yet paid, discounted using the [discount rate for the lease](https://asc.understandingaccounting.org/glossary/d/#discount-rate-for-the-lease "For a lessee, the discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the lessee is required to use its incremental borrowing rate. For a lessor, the discount rate for the lease is the rate implicit in the lease.") at lease commencement (as described in paragraphs [842-20-30-2 through 30-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-2) ) 2. b 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.") as described in paragraph [842-20-30-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-5). #### Discount Rate for the Lease ##### [842-20-30-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:371afc67fb8e3a80a14fb8a007ca1bd322c57e94687e092ba93723a3750263e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [discount rate for the lease](https://asc.understandingaccounting.org/glossary/d/#discount-rate-for-the-lease "For a lessee, the discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the lessee is required to use its incremental borrowing rate. For a lessor, the discount rate for the lease is the rate implicit in the lease.") initially used to determine the present value of 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.") for 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.") is calculated on the basis of information available 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."). ##### [842-20-30-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:04597f7f9a74c367f14806b942dfca8f2e2917487fef35d0c23f0ee715cc2914 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee should use the [rate implicit in the lease](https://asc.understandingaccounting.org/glossary/r/#rate-implicit-in-the-lease "The rate of interest that, at a given date, causes the aggregate present value of (a) the lease paymentsand (b) the amount that a lessor expects to derive from the underlying asset following the end of the lease termto equal the sum of (1) the fair value of the underlying asset minus any related investment tax credit retained and expected to be realized by the lessor and (2) any deferred initial direct costs of the lessor. However, if the rate determined in accordance with the preceding sentence is less than zero, a rate implicit in the lease of zero shall be used.") whenever that rate is readily determinable. If the rate implicit in the lease is not readily determinable, a lessee uses its [incremental borrowing rate](https://asc.understandingaccounting.org/glossary/i/#incremental-borrowing-rate "The rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment."). A lessee that is not a public business entity is permitted to use a risk-free discount rate for the lease instead of its incremental borrowing rate, determined using a period comparable with that of 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."), as an accounting policy election made by class of underlying asset. ##### [842-20-30-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:1c2c74a73cdd1cf408314e85448266dfd835c1772adb731a2e2caf61106d7ff8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 2 (paragraphs [842-20-55-17 through 55-20](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-17) ) for an illustration of the requirements on the discount rate. #### Initial Measurement of the Right-of-Use Asset ##### [842-20-30-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:11a22e13e976a31187d5004b15fa80d6e5521746addfd0e4204bd87122e4c800 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."), the cost 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.") shall consist of all of the following: 1. a The amount of the initial measurement of 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 Any [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.") made to the [lessor](https://asc.understandingaccounting.org/glossary/l/#lessor "An entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration.") at or before the commencement date, minus any lease incentives received 3. c Any [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.") incurred by the [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.") (as described in paragraphs [842-10-30-9 through 30-10](https://asc.understandingaccounting.org/asc/842/10/#842-10-30-9) ). ##### [842-20-30-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:41.579Z to 2026-09-10T01:56:41.579Z Record version: sha256:1d325ef6aada938309e3e5e883f9fdf6652e296aa819c095a3943be546b06ecf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 3 (paragraphs [842-20-55-21 through 55-39](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-21) ) for an illustration of the requirements on lessee measurement of 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.").