# ASC 842-20: Leases — Lessee Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/20/) 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): 2026-09-10T01:56:28.044Z to 2026-09-10T01:57:02.089Z Record version: sha256:a61affa44d94b4392810bc01eea292746b0b3f2bf8609a4807e8d0b69278895d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20: Leases — Lessee ### Machine-generated study aids ```json { "summary": "ASC 842-20 governs how a lessee accounts for leases already classified as finance or operating leases under 842-10. At commencement the lessee recognizes a right-of-use asset and lease liability measured at the present value of unpaid lease payments (842-20-25-1; 30-1); thereafter finance leases produce separate amortization and interest (842-20-25-5), while operating leases produce a single straight-line lease cost (842-20-25-6). It also covers short-term lease policy elections, remeasurement, ROU asset impairment, leasehold improvements, subleases, terminations, and extensive presentation and disclosure requirements.", "key_points": [ "At the commencement date a lessee recognizes a right-of-use asset and a lease liability (842-20-25-1); the liability is the present value of lease payments not yet paid using the rate implicit in the lease if readily determinable, otherwise the incremental borrowing rate (a non-public business entity may elect a risk-free rate by class of underlying asset) (842-20-30-1 through 30-3).", "The ROU asset's initial cost equals the lease liability plus prepayments to the lessor less lease incentives received plus initial direct costs (842-20-30-5).", "A lessee may elect, by class of underlying asset, not to recognize ROU assets and lease liabilities for short-term leases and instead recognize lease payments straight-line over the lease term (842-20-25-2); the lease ceases to be short term if a change extends the remaining term more than 12 months or a purchase option becomes reasonably certain (842-20-25-3).", "For finance leases, the lessee recognizes amortization of the ROU asset plus interest on the liability using a constant periodic discount rate (842-20-25-5; 35-1); for operating leases, the lessee recognizes a single lease cost allocating the remaining cost of the lease (total lease payments plus initial direct costs less cost already recognized) straight-line over the remaining lease term (842-20-25-6(a); 25-8).", "Variable lease payments not included in the liability are recognized in the period the obligation is incurred, but are accrued before the target is achieved when achievement is probable and reversed when it becomes probable the target will not be met (842-20-25-5(b); 55-1 through 55-2).", "Remeasurement of the lease liability is recorded as an adjustment to the ROU asset (with any excess in profit or loss once the asset is zero), and the discount rate is updated at remeasurement except in the circumstances listed in 842-20-35-5 (842-20-35-4 through 35-5).", "ROU assets are tested for impairment under Section 360-10-35; after impairment an operating lease ROU asset is amortized straight-line with separate accretion of the liability (842-20-25-7; 35-9 through 35-10), and leasehold improvements are amortized over the shorter of their useful life and the remaining lease term, with special common-control rules in 842-20-35-12A." ], "categories": [ "Leases", "Initial measurement", "Subsequent measurement", "Disclosure" ], "audience_level": "intermediate", "student_note": "This is the heart of the lessee model tested on the CPA exam: both lease types put an asset and liability on the balance sheet, and only the income statement pattern differs (front-loaded amortization plus interest for finance leases versus a level single lease cost for operating leases). The most common misunderstanding is thinking an operating lease ROU asset is amortized like a fixed asset — it is instead plugged to the lease liability adjusted for prepaid/accrued rent, unamortized initial direct costs, and remaining lease incentives, unless it has been impaired.", "related_topics": [ "842-10", "842-30", "842-40", "360-10", "230-10", "850-10" ], "key_concepts": [ "right-of-use asset", "lease liability", "finance lease", "operating lease", "single lease cost", "short-term lease election", "incremental borrowing rate", "remeasurement and impairment of rou asset" ] } ``` Source downloaded (UTC): 2026-09-10T01:56:28.044Z to 2026-09-10T01:56:28.044Z Record version: sha256:53d4fd983f5289514c4368cb196a1044298cb2ed5f9e70e05874786ec6b348d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/842/20/#00-status) SEC content: no ##### [842-20-00-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:28.044Z to 2026-09-10T01:56:28.044Z Record version: sha256:beeeb7720d9e5ac580406e52ce8fca0cccf9a11c9fe6851e740acbe846316e85 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AcquireeAddedAccounting Standards Update No. 2016-0202/25/2016
AcquirerAmendedAccounting Standards Update No. 2025-0305/12/2025
AcquirerAddedAccounting Standards Update No. 2016-0202/25/2016
Acquisition by a Not-for-Profit EntityAddedAccounting Standards Update No. 2016-0202/25/2016
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
BusinessAddedAccounting Standards Update No. 2016-0202/25/2016
Business CombinationAddedAccounting Standards Update No. 2016-0202/25/2016
Commencement Date of the Lease (Commencement Date)AddedAccounting Standards Update No. 2016-0202/25/2016
ContractAddedAccounting Standards Update No. 2016-0202/25/2016
Corporate Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
Direct Financing LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
Direct Financing LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Discount Rate for the LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Fair Value (2nd def.)AddedAccounting Standards Update No. 2016-0202/25/2016
Finance LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Incremental Borrowing RateAddedAccounting Standards Update No. 2016-0202/25/2016
Initial Direct CostsAddedAccounting Standards Update No. 2016-0202/25/2016
Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Lease LiabilityAddedAccounting Standards Update No. 2016-0202/25/2016
Lease ModificationAddedAccounting Standards Update No. 2016-0202/25/2016
Lease PaymentsAddedAccounting Standards Update No. 2016-0202/25/2016
Lease TermAddedAccounting Standards Update No. 2016-0202/25/2016
Legal EntityAddedAccounting Standards Update No. 2016-0202/25/2016
LesseeAddedAccounting Standards Update No. 2016-0202/25/2016
LessorAddedAccounting Standards Update No. 2016-0202/25/2016
Market ParticipantsAddedAccounting Standards Update No. 2016-0202/25/2016
Monetary LiabilityAddedAccounting Standards Update No. 2016-0202/25/2016
Not-for-Profit EntityAddedAccounting Standards Update No. 2016-0202/25/2016
Operating LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Orderly TransactionAddedAccounting Standards Update No. 2016-0202/25/2016
Probable (2nd def.)AddedAccounting Standards Update No. 2016-0202/25/2016
Rate Implicit in the LeaseAmendedAccounting Standards Update No. 2018-1007/18/2018
Rate Implicit in the LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Related PartiesAddedAccounting Standards Update No. 2016-0202/25/2016
Residual Value GuaranteeAddedAccounting Standards Update No. 2016-0202/25/2016
Right-of-Use AssetAddedAccounting Standards Update No. 2016-0202/25/2016
Sales-Type LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
Sales-Type LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Short-Term LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
SubleaseAddedAccounting Standards Update No. 2016-0202/25/2016
Underlying AssetAddedAccounting Standards Update No. 2016-0202/25/2016
Useful LifeAddedAccounting Standards Update No. 2016-0202/25/2016
Variable Interest EntitySupersededAccounting Standards Update No. 2025-0305/12/2025
Variable Interest EntityAddedAccounting Standards Update No. 2016-0202/25/2016
Variable Lease PaymentsAddedAccounting Standards Update No. 2016-0202/25/2016
842-20-05-1AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-15-1AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-25-1 through 25-8
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-30-1 through 30-6
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-30-3AmendedAccounting Standards Update No. 2021-0911/11/2021
842-20-35-1 through 35-15
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-35-12AmendedAccounting Standards Update No. 2023-0103/27/2023
842-20-35-12A through 35-12C
AddedAccounting Standards Update No. 2023-0103/27/2023
842-20-35-13AmendedAccounting Standards Update No. 2023-0508/23/2023
842-20-40-1 through 40-3
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-45-1 through 45-5
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-50-1AmendedAccounting Standards Update No. 2021-0911/11/2021
842-20-50-1 through 50-9
AddedAccounting Standards Update No. 2016-0202/25/2016
842-20-50-4AmendedAccounting Standards Update No. 2024-0311/04/2024
842-20-50-7AAddedAccounting Standards Update No. 2023-0103/27/2023
842-20-50-10AddedAccounting Standards Update No. 2021-0911/11/2021
842-20-55-1 through 55-53
AddedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-10T01:56:30.278Z to 2026-09-10T01:56:30.278Z Record version: sha256:bba73173112883d57457239ffa231cb739c93111681c19ea4c14b26a3e8ca039 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/842/20/#05-overview-and-background) SEC content: no ##### [842-20-05-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:30.278Z to 2026-09-10T01:56:30.278Z Record version: sha256:6f1124f5a3f9c5cc9f005bc37ccd337031b8b0dc62df554db0bc2d9641dc9540 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses accounting by [lessees](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.") for [leases](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.") that have been classified as [finance leases](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") or [operating leases](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.") in accordance with the requirements in Subtopic 842-10. Lessees shall follow the requirements in this Subtopic as well as those in Subtopic 842-10. Source downloaded (UTC): 2026-09-10T01:56:32.937Z to 2026-09-10T01:56:32.937Z Record version: sha256:41cd1fb96ce40f20dc570b784884fbbd3b39d78ab51c757fd93d2662fc95ec0e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/842/20/#15-scope-and-scope-exceptions) SEC content: no ##### [842-20-15-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:32.937Z to 2026-09-10T01:56:32.937Z Record version: sha256:b1e0b5c7553c12222cb4f9484a0143ab5e3bf4c1eb80736d57bc412651ed6d56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic. 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. 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."). Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:c0bf02335b8acbe9fe21f16ad20591a9aef558cf797553bd12887fc4971ded15 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/842/20/#35-subsequent-measurement) SEC content: no ##### [842-20-35-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:75859c2e81feb2c420183192de3a0be9a839c1947c8ac7f0f54e16ad16acb14f 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."), for a [finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2."), 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.") by increasing the carrying amount to reflect interest on the lease liability and reducing the carrying amount to reflect 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.") made during the period. The lessee shall determine the interest on the lease liability in each period during 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 the amount that produces a constant periodic discount rate on the remaining balance of the liability, taking into consideration the reassessment requirements in paragraphs [842-10-35-1 through 35-5](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-1) . 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.") at cost less any accumulated amortization and any accumulated impairment losses, taking into consideration the reassessment requirements in paragraphs [842-10-35-1 through 35-5](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-1) . ##### [842-20-35-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:c234f10a718928ab0cce6783f54abecd5ac4468d4d0955caaaaffa44a329d67f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall recognize amortization of the right-of-use asset and interest on the lease liability for a finance lease in accordance with paragraph [842-20-25-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-5). ##### [842-20-35-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:e40375fc1e302ec16b435d6b07bb6657d0bd78d49e798fb12c7f416dcb538425 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the commencement date, for 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."), a lessee shall measure both of the following: 1. a The lease liability at the present value of the lease payments 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.") established at the commencement date (unless the rate has been updated after the commencement date in accordance with paragraph [842-20-35-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-5), in which case that updated rate shall be used) 2. b The right-of-use asset at the amount of the lease liability, adjusted for the following, unless the right-of-use asset has been previously impaired, in which case the right-of-use asset is measured in accordance with paragraph [842-20-35-10](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-10) after the impairment: 1. 1 Prepaid or accrued lease payments 2. 2 The remaining balance of any lease incentives received, which is the amount of the gross lease incentives received net of amounts recognized previously as part of the single lease cost described in paragraph [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) 3. 3 Unamortized [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.") 4. 4 Impairment of the right-of-use asset. #### Remeasurement of the Lease Liability ##### [842-20-35-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:6e2e9c0f483ca86c4ce6739c30a580d4c01be15546e4f7822dbe7b7ac2d94752 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 remeasure 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.") to reflect changes to 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.") as described in paragraphs [842-10-35-4 through 35-5](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-4) . A lessee shall recognize the amount of the remeasurement of the lease liability as an adjustment to 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."). However, if the carrying amount of the right-of-use asset is reduced to zero, a lessee shall recognize any remaining amount of the remeasurement in profit or loss. ##### [842-20-35-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:54f089a91d7144a5f3011f8af65e896329db8d8ef41c61c52923f090e9e25da0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there is a remeasurement of the lease liability in accordance with paragraph [842-20-35-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-4), the lessee shall update 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 the date of remeasurement on the basis of 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.") and the remaining lease payments unless the remeasurement of the lease liability is the result of one of the following: 1. a A change in the lease term or the assessment of whether the lessee will exercise an option to purchase 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.") and the discount rate for the lease already reflects that the lessee has an option to extend or terminate 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.") or to purchase the underlying asset. 2. b A change in amounts [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") of being owed by the lessee under a [residual value guarantee](https://asc.understandingaccounting.org/glossary/r/#residual-value-guarantee "A guarantee made to a lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount.") (see paragraph [842-10-35-4(c)(3)](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-4)). 3. c A change in the lease payments resulting from the resolution of a contingency upon which some or all of the [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.") that will be paid over the remainder of the lease term are based (see paragraph [842-10-35-4(b)](https://asc.understandingaccounting.org/asc/842/10/#842-10-35-4)). ##### [842-20-35-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:7ffd25aadebb3aacbfeecf5c02a97301e29b429347bf77fd78f30480c4153e82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 3 and 4 (paragraphs [842-20-55-21 through 55-46](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-21) ) for an illustration of the requirements on lessee subsequent measurement. #### Amortization of the Right-of-Use Asset for a Finance Lease ##### [842-20-35-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:eb2d6736645455d0081f50e28fcf515d389ea1d9ed727adfd57c02e97d85054a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 amortize 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.") on a straight-line basis, unless another systematic basis is more representative of the pattern in which the lessee expects to consume the right-of-use asset's future economic benefits. When 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.") is remeasured and the right-of-use asset is adjusted in accordance with paragraph [842-20-35-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-4), amortization of the right-of-use asset shall be adjusted prospectively from the date of remeasurement. ##### [842-20-35-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:3ca476b13bb967849da78774288a14b1cd22e8e8fb06838701dc3f7023298a72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall amortize the right-of-use asset from 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.") to the earlier of the end of the [useful life](https://asc.understandingaccounting.org/glossary/u/#useful-life "The period over which an asset is expected to contribute directly or indirectly to future cash flows.") of the right-of-use asset or the end 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."). However, if 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.") transfers ownership of 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.") to the lessee or the lessee is reasonably certain to exercise an option to purchase the underlying asset, the lessee shall amortize the right-of-use asset to the end of the useful life of the underlying asset. #### Impairment of a Right-of-Use Asset ##### [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:f3466c2bc4079589dda75c5a5f014339ce1b65bc8e18d292ed908af371820bc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 determine whether 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.") is impaired and shall recognize any impairment loss in accordance with Section 360-10-35 on impairment or disposal of long-lived assets. ##### [842-20-35-10](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:e50ef8be429a70f5fd8c04b2be0c65da8103394a57df4151656979e4e6af9280 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a right-of-use asset is impaired in accordance with paragraph [842-20-35-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-9), after the impairment, it shall be measured at its carrying amount immediately after the impairment less any accumulated amortization. A lessee shall amortize, in accordance with paragraph [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7) (for 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.")) or paragraph [842-20-35-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-7) (for a [finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.")), the right-of-use asset from the date of the impairment to the earlier of the end of the [useful life](https://asc.understandingaccounting.org/glossary/u/#useful-life "The period over which an asset is expected to contribute directly or indirectly to future cash flows.") of the right-of-use asset or the end 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."). ##### [842-20-35-11](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:25877315e57a26464cb16df162b9bb5ef126fa120624a5e3236eeacadbe59ea2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 5 (paragraphs [842-20-55-47 through 55-51](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-47) ) for an illustration of the requirements for impairment of a right-of-use asset. #### Amortization of Leasehold Improvements ##### [842-20-35-12](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:cc8e7089deec1a233f3313bb846205b6fa9cc404ee2d844a59c2487b7ce230c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Leasehold improvements, other than those accounted for in accordance with paragraph [842-20-35-12A](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12A), shall be amortized over the shorter of the [useful life](https://asc.understandingaccounting.org/glossary/u/#useful-life "The period over which an asset is expected to contribute directly or indirectly to future cash flows.") of those leasehold improvements and 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."), unless 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.") transfers ownership of 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.") to 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.") or the lessee is reasonably certain to exercise an option to purchase the underlying asset, in which case the lessee shall amortize the leasehold improvements to the end of their useful life. ##### [842-20-35-12A](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12A) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:fcf9b1b65723870d3229cdd3a464d1e7b26b5df71791c719dac6bf80f2653057 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Leasehold improvements associated with a lease between entities under common control shall be: 1. a Amortized over the useful life of those improvements to the common control group as long as the lessee controls the use of the underlying asset through a lease. If 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.") obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period shall not exceed the amortization period of the common control group determined in accordance with paragraph [842-20-35-12](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12). 2. b Accounted for as a transfer between entities under common control through an adjustment to equity (net assets for a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.")) when the lessee no longer controls the use of the underlying asset. ##### [842-20-35-12B](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12B) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:2b417eec9095ec4d61e09a5281cbfb08edb6dab713caab3fe6cd0924dc62df05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity with leasehold improvements accounted for in accordance with paragraph [842-20-35-12A](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12A) shall apply the impairment requirements in paragraph [360-10-40-4](https://asc.understandingaccounting.org/asc/360/10/#360-10-40-4), considering the useful life to the common control group. ##### [842-20-35-12C](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12C) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:e4f321533d98d04f5b79859d95b13d3548889a2136118b5dbcef8b56925972f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If 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.") the lessee and lessor become within the same common control group or are no longer within the same common control group, any change in the required amortization period for leasehold improvements shall be accounted for prospectively as a [change in accounting estimate](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-estimate "A change that has the effect of adjusting the carrying amount of an existing asset or liability or altering the subsequent accounting for existing or future assets or liabilities. A change in accounting estimate is a necessary consequence of the assessment, in conjunction with the periodic presentation of financial statements, of the present status and expected future benefits and obligations associated with assets and liabilities. Changes in accounting estimates result from new information. Examples of items for which estimates are necessary are uncollectible receivables, inventory obsolescence, service lives and salvage values of depreciable assets, and warranty obligations.") in accordance with paragraph [250-10-45-17](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-17). ##### [842-20-35-13](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:56f004212a5d0a6f840c242850a18ec16a2b9c6f91c6d4e95501cc435554b33d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Leasehold improvements acquired in a [business combination](https://asc.understandingaccounting.org/glossary/b/#business-combination "A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals also are business combinations. See also Acquisition by a Not-for-Profit Entity."), acquired in an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities."), or recognized by a [joint venture](https://asc.understandingaccounting.org/glossary/j/#joint-venture "An entity owned and operated by a small group of businesses (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a joint venture frequently is to share risks and rewards in developing a new market, product, or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a joint venture. The ownership of a joint venture seldom changes, and its equity interests usually are not traded publicly. A minority public ownership, however, does not preclude an entity from being a joint venture. As distinguished from a corporate joint venture, a joint venture is not limited to corporate entities.") upon formation shall be amortized over the shorter of the useful life of the assets and the remaining lease term at the date of acquisition. #### Subleases ##### [842-20-35-14](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:2885ea238c55246f9e57e875694a6dc0a9d811e2b92f575eb9b68d0c0c4bc149 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the nature of a [sublease](https://asc.understandingaccounting.org/glossary/s/#sublease "A transaction in which an underlying asset is re-leased by the lessee (or intermediate lessor) to a third party (the sublessee) and the original (or head) lease between the lessor and the lessee remains in effect.") is such that the original [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 not relieved of the primary obligation under the original [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."), the original lessee (as sublessor) shall continue to account for the original lease in one of the following ways: 1. a If the sublease is classified as 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."), the original lessee shall continue to account for the original lease as it did before commencement of the sublease. If the lease cost for the term of the sublease exceeds the anticipated sublease income for that same period, the original lessee shall treat that circumstance as an indicator that the carrying amount 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.") associated with the original lease may not be recoverable in accordance with paragraph [360-10-35-21](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-21). 2. b If the original lease is classified as a [finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") and the sublease is classified as a [sales-type lease](https://asc.understandingaccounting.org/glossary/s/#sales-type-lease "From the perspective of a lessor, a lease that meets one or more of the criteria in paragraph 842-10-25-2 and is not an operating lease in accordance with paragraph 842-10-25-3A.") or a [direct financing lease](https://asc.understandingaccounting.org/glossary/d/#direct-financing-leases "Glossary term superseded by Accounting Standards Update No. 2016-02."), the original lessee shall derecognize the original right-of-use asset in accordance with paragraph [842-30-40-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-40-1) and continue to account for the original [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.") as it did before commencement of the sublease. The original lessee shall evaluate its investment in the sublease for impairment in accordance with paragraph [842-30-35-3](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3). 3. c If the original lease is classified as an operating lease and the sublease is classified as a sales-type lease or a direct financing lease, the original lessee shall derecognize the original right-of-use asset in accordance with paragraph [842-30-40-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-40-1) and, from the sublease [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."), account for the original lease liability in accordance with paragraphs [842-20-35-1 through 35-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-1) . The original lessee shall evaluate its investment in the sublease for impairment in accordance with paragraph [842-30-35-3](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3). ##### [842-20-35-15](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:44.820Z to 2026-09-10T01:56:44.820Z Record version: sha256:f2140fc8f56e7a4deaf47c28e22056804a568aadb11197ee69ca2735ceae3140 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The original lessee (as sublessor) in a sublease shall 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.") to determine the classification of the sublease and to measure the net investment in the sublease if the sublease is classified as a sales-type or a direct financing lease unless that rate cannot be readily determined. If the rate implicit in the lease cannot be readily determined, the original lessee may use 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.") established for the original (or head) lease. Source downloaded (UTC): 2026-09-10T01:56:47.806Z to 2026-09-10T01:56:47.806Z Record version: sha256:309b912d5a73ef73687811a49e0a8f461bb86ae12989b4d0f25bf542fc714706 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/842/20/#40-derecognition) SEC content: no #### Lease Termination ##### [842-20-40-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:47.806Z to 2026-09-10T01:56:47.806Z Record version: sha256:024d22b87882fe90f83ef320d38b4a1594ef4e8654cc649dcd9523bcafd6c4aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A termination of a [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.") before the expiration 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.") shall be accounted for 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.") by removing 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 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."), with profit or loss recognized for the difference. ##### [842-20-40-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:47.806Z to 2026-09-10T01:56:47.806Z Record version: sha256:4605da6f3227a942c5bf3f2fa433c548ef1f9c284d946a9c9af12d3d02b54f81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The termination of a [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.") that results from the purchase of an [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.") 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.") is not the type of termination of a lease contemplated by paragraph [842-20-40-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-1) but, rather, is an integral part of the purchase of the underlying asset. If the lessee purchases the underlying asset, any difference between the purchase price and the carrying amount of the lease liability immediately before the purchase shall be recorded by the lessee as an adjustment of the carrying amount of the asset. However, this paragraph does not apply to underlying assets acquired in a [business combination](https://asc.understandingaccounting.org/glossary/b/#business-combination "A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals also are business combinations. See also Acquisition by a Not-for-Profit Entity."), which are initially measured at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") in accordance with paragraph [805-20-30-1](https://asc.understandingaccounting.org/asc/805/20/#805-20-30-1). #### Subleases ##### [842-20-40-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:47.806Z to 2026-09-10T01:56:47.806Z Record version: sha256:7fcf2a08c4e18697b2d4c3ae2dd2939d3884f4631d33d74d4a4d45865db569e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the nature of a [sublease](https://asc.understandingaccounting.org/glossary/s/#sublease "A transaction in which an underlying asset is re-leased by the lessee (or intermediate lessor) to a third party (the sublessee) and the original (or head) lease between the lessor and the lessee remains in effect.") is such that the original [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 relieved of the primary obligation under the original [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."), the transaction shall be considered a termination of the original lease. Paragraph [842-20-35-14](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-14) addresses subleases in which the original lessee is not relieved of the primary obligation under the original lease. Any consideration paid or received upon termination that was not already included in 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 example, a termination payment that was not included in the lease payments based on 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.")) shall be included in the determination of profit or loss to be recognized in accordance with paragraph [842-20-40-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-1). If a sublease is a termination of the original lease and the original lessee is secondarily liable, the guarantee obligation shall be recognized by the lessee in accordance with paragraph [405-20-40-2](https://asc.understandingaccounting.org/asc/405/20/#405-20-40-2). Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:a731fd98b6e55d46516de819ac97e06f8d976e7e98bce16febed45b1526dd8eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/842/20/#45-other-presentation-matters) SEC content: no #### Statement of Financial Position ##### [842-20-45-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:14e85278918a72aa2f838e4c3d0c3ec5dd1931dcfc73fbe1cf7141dd05c2ab9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 either present in the statement of financial position or disclose in the notes all of the following: 1. a [Finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") [right-of-use assets](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 [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.") right-of-use assets separately from each other and from other assets 2. b Finance [lease liabilities](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.") and operating lease liabilities separately from each other and from other liabilities. Right-of-use assets and lease liabilities shall be subject to the same considerations as other nonfinancial assets and financial liabilities in classifying them as current and noncurrent in classified statements of financial position. ##### [842-20-45-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:908841b1eee360e8fcdf88f330a6ba07678fb10826146121c8eaf1ca7c442d5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a lessee does not present finance lease and operating lease right-of-use assets and lease liabilities separately in the statement of financial position, the lessee shall disclose which line items in the statement of financial position include those right-of-use assets and lease liabilities. ##### [842-20-45-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:9094e7b80d6796f932d02c0507358823609271ca698e5056052f72a6f8f08dab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the statement of financial position, a lessee is prohibited from presenting both of the following: 1. a Finance lease right-of-use assets in the same line item as operating lease right-of-use assets 2. b Finance lease liabilities in the same line item as operating lease liabilities. #### Statement of Comprehensive Income ##### [842-20-45-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:462979491902f5ac543e3853cf8333e110ca27479d8888225eb4d590a5ab8c97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the statement of comprehensive income, 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 present both of the following: 1. a For [finance leases](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2."), the interest expense 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.") and 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.") are not required to be presented as separate line items and shall be presented in a manner consistent with how the entity presents other interest expense and depreciation or amortization of similar assets, respectively 2. b For [operating leases](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."), [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.") expense shall be included in the lessee's income from continuing operations. #### Statement of Cash Flows ##### [842-20-45-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:51.193Z to 2026-09-10T01:56:51.193Z Record version: sha256:70365eec1631233efc1b67452c3ff6e88ea73175b539407b6b419cc22c199e4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the statement of cash flows, 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 classify all of the following: 1. a Repayments of the principal portion 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.") arising from [finance leases](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") within financing activities 2. b Interest on the lease liability arising from finance leases in accordance with the requirements relating to interest paid in Topic 230 on cash flows 3. c Payments arising from [operating leases](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.") within operating activities, except to the extent that those payments represent costs to bring another asset to the condition and location necessary for its intended use, which should be classified within investing activities 4. d [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.") and [short-term lease](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.") payments not included in the lease liability within operating activities. Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:81f66780108ffa67ccf7faefaf0f824d1efbe6f6eabb1c6bc3395d8354c52ee3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/842/20/#50-disclosure) SEC content: no ##### [842-20-50-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:6dcad2341893d11ae0c66f82e44d35763bc0cfeb8ffa21a6196637318acdac08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective of the disclosure requirements is to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from [leases](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."). To achieve that objective, 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 disclose qualitative and quantitative information about all of the following: 1. a Its leases (as described in paragraphs [842-20-50-3(a) through (b)](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-3) and [842-20-50-7 through 50-10](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-7) ) 2. b The significant judgments made in applying the requirements in this Topic to those leases (as described in paragraph [842-20-50-3(c)](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-3)) 3. c The amounts recognized in the financial statements relating to those leases (as described in paragraphs [842-20-50-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-4) and [842-20-50-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-6)). ##### [842-20-50-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:6fceced820e71c5db06391672716ec764dc168bceefcf271a2eb64af317cc2da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. A lessee shall aggregate or disaggregate disclosures so that useful information is not obscured by including a large amount of insignificant detail or by aggregating items that have different characteristics. ##### [842-20-50-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:5590ba9456049860cde5198107b603a171291285c0b9031dea92e69b7c01eda3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall disclose all of the following: 1. a Information about the nature of its leases, including: 1. 1 A general description of those leases. 2. 2 The basis and terms and conditions on which [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.") are determined. 3. 3 The existence and terms and conditions of options to extend or terminate the lease. A lessee should provide narrative disclosure about the options that are recognized as part of its [right-of-use assets](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 [lease liabilities](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.") and those that are not. 4. 4 The existence and terms and conditions of [residual value guarantees](https://asc.understandingaccounting.org/glossary/r/#residual-value-guarantee "A guarantee made to a lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount.") provided by the lessee. 5. 5 The restrictions or covenants imposed by leases, for example, those relating to dividends or incurring additional financial obligations. A lessee should identify the information relating to [subleases](https://asc.understandingaccounting.org/glossary/s/#sublease "A transaction in which an underlying asset is re-leased by the lessee (or intermediate lessor) to a third party (the sublessee) and the original (or head) lease between the lessor and the lessee remains in effect.") included in the disclosures provided in (1) through (5), as applicable. 2. b Information about leases that have not yet commenced but that create significant rights and obligations for the lessee, including the nature of any involvement with the construction or design of 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."). 3. c Information about significant assumptions and judgments made in applying the requirements of this Topic, which may include the following: 1. 1 The determination of whether a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") contains a lease (as described in paragraphs [842-10-15-2 through 15-27](https://asc.understandingaccounting.org/asc/842/10/#842-10-15-2) ) 2. 2 The allocation of the consideration in a contract between lease and nonlease components (as described in paragraphs [842-10-15-28 through 15-32](https://asc.understandingaccounting.org/asc/842/10/#842-10-15-28) ) 3. 3 The determination of 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.") (as described in paragraphs [842-20-30-2 through 30-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-2) ). ##### [842-20-50-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:dbf0a063cfd8777057400c9acc8f6dc6ad38737154114ba864643df45303fa86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each period presented in the financial statements, a lessee shall disclose the following amounts relating to a lessee's total lease cost, which includes both amounts recognized in profit or loss during the period and any amounts capitalized as part of the cost of another asset in accordance with other Topics, and the cash flows arising from lease transactions: 1. a [Finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") cost, segregated between the amortization of the right-of-use assets and interest on the lease liabilities. 2. b [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.") cost determined in accordance with paragraphs [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) and [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7). 3. c [Short-term lease](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.") cost, excluding expenses relating to leases with a [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.") of one month or less, determined in accordance with paragraph [842-20-25-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-2). 4. d Variable lease cost determined in accordance with paragraphs [842-20-25-5(b)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-5) and [842-20-25-6(b)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6). 5. e Sublease income, disclosed on a gross basis, separate from the finance or operating lease expense. 6. f Net gain or loss recognized from sale and leaseback transactions in accordance with paragraph [842-40-25-4](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-4). 7. g Amounts segregated between those for finance and operating leases for the following items: 1. 1 Cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows 2. 2 Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets 3. 3 Weighted-average remaining lease term 4. 4 Weighted-average discount rate. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [220-40-65-1](https://asc.understandingaccounting.org/asc/220/40/#220-40-65-1)For each period presented in the financial statements, a lessee shall disclose the following amounts relating to a lessee's total lease cost, which includes both amounts recognized in profit or loss during the period and any amounts capitalized as part of the cost of another asset in accordance with other Topics, and the cash flows arising from lease transactions: 1. a [Finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") cost, segregated between the amortization of the right-of-use assets and interest on the lease liabilities. 2. b [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.") cost determined in accordance with paragraphs [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) and [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7). 3. c [Short-term lease](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.") cost, excluding expenses relating to leases with a [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.") of one month or less, determined in accordance with paragraph [842-20-25-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-2). 4. d Variable lease cost determined in accordance with paragraphs [842-20-25-5(b)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-5) and [842-20-25-6(b)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6). 5. e Sublease income, disclosed on a gross basis, separate from the finance or operating lease expense. 6. f Net gain or loss recognized from sale and leaseback transactions in accordance with paragraph [842-40-25-4](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-4). 7. g Amounts segregated between those for finance and operating leases for the following items: 1. 1 Cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows 2. 2 Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets 3. 3 Weighted-average remaining lease term 4. 4 Weighted-average discount rate. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. ##### [842-20-50-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:5f70492fd3ec003a691a8fdbc4c265bf30ec23b7464e00fe6546d1c358e0ebca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [842-20-55-11 through 55-12](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-11) for implementation guidance on preparing the weighted-average remaining lease term and the weighted-average discount rate disclosures. See Example 6 (paragraphs [842-20-55-52 through 55-53](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-52) ) for an illustration of the lessee quantitative disclosure requirements in paragraph [842-20-50-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-4). ##### [842-20-50-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:c51df03dfa17d86a684363fd5c9c9a06fcd728d602ea9b5cc06e356a3416cfd4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall disclose a maturity analysis of its finance lease liabilities and its operating lease liabilities separately, showing the undiscounted cash flows on an annual basis for a minimum of each of the first five years and a total of the amounts for the remaining years. A lessee shall disclose a reconciliation of the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recognized in the statement of financial position. ##### [842-20-50-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:68c6a86e2783e69d0b563f73b5a3ba1e08032cbab59e50a5a100c34193a9c899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee shall disclose lease transactions between related parties in accordance with paragraphs [850-10-50-1 through 50-6](https://asc.understandingaccounting.org/asc/850/10/#850-10-50-1) . ##### [842-20-50-7A](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-7A) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:a6c2f36ead616186ac671d2e3cc1784d010733f4dbd3e14c85bd83dd0c1927fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the [useful life](https://asc.understandingaccounting.org/glossary/u/#useful-life "The period over which an asset is expected to contribute directly or indirectly to future cash flows.") of leasehold improvements to the common control group determined in accordance with paragraph [842-20-35-12A](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-12A) exceeds the related lease term, a lessee shall disclose the following information: 1. a The unamortized balance of the leasehold improvements at the balance sheet date 2. b The remaining useful life of the leasehold improvements to the common control group 3. c The remaining lease term. ##### [842-20-50-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:e7c232b2f2fe2d4ebc7cdd884f76608fc0e1b906881f076c2f5299e2b1ec2238 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee that accounts for short-term leases in accordance with paragraph [842-20-25-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-2) shall disclose that fact. If the short-term lease expense for the period does not reasonably reflect the lessee's short-term lease commitments, a lessee shall disclose that fact and the amount of its short-term lease commitments. ##### [842-20-50-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:aa81154b21a1d2921bb32521bbee7b82d0b18eee163245e1bc14caacbdcec375 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee that elects the practical expedient on not separating lease components from nonlease components in paragraph [842-10-15-37](https://asc.understandingaccounting.org/asc/842/10/#842-10-15-37) shall disclose its accounting policy election and which class or classes of underlying assets it has elected to apply the practical expedient. ##### [842-20-50-10](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:55.303Z to 2026-09-10T01:56:55.303Z Record version: sha256:f1dc381883b4ea079d8f0cde7a64c6cbd05bae17b425f274d246bbacd142a767 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee that makes the accounting policy election in paragraph [842-20-30-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-30-3) to use a risk-free rate as the discount rate shall disclose its election and the class or classes of underlying assets to which the election has been applied. Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:eda07bdf5139429777bd1cd4659302d1e13ee5ce41eac1ca3a13a1825b01952c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/842/20/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [842-20-55-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:78c6e31c9a6f34586f66c0c7225c794eadaf10d272f1f94f3e9e6843dd9f2051 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") should recognize costs from [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 annual periods as well as in interim periods) before the achievement of the specified target that triggers the variable lease payments, provided the achievement of that target is considered [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur."). ##### [842-20-55-2](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:58563d988ba97456c3be69dc729b868700188a28b784e056e001ba8ea41f5de2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Variable lease costs recognized in accordance with paragraph [842-20-55-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-1) should be reversed at such time that it is probable that the specified target will not be met. ##### [842-20-55-3](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:0413995d13e69f2b40540d385398b88f67f0be047e4b55082532098db2ffe62e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic considers the right to control the use of 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.") as the equivalent of physical use. If 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.") controls the use of the underlying asset, recognition of [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.") cost in accordance with paragraph [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) or 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.") in accordance with paragraph [842-20-35-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-35-7) should not be affected by the extent to which the lessee uses the underlying asset. ##### [842-20-55-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:b6b54eaf923d30b59017b65e5167fa5435a485e596a1aaad2675744704b7baa0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under certain [leases](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.") (for example, certain equipment leases), 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 legally or contractually responsible for repair and maintenance of 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.") throughout 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."). Additionally, certain lease agreements include provisions requiring the lessee to make deposits 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.") to financially protect the lessor in the event the lessee does not properly maintain the underlying asset. Lease agreements often refer to these deposits as maintenance reserves or supplemental rent. However, the lessor is required to reimburse the deposits to the lessee on the completion of maintenance activities that the lessee is contractually required to perform under the lease agreement. ##### [842-20-55-5](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:1fcde55f6be21e824428fc444c0c7ea54af622fbd2987edac10786da898a1a92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under a typical arrangement, maintenance deposits are calculated on the basis of a performance measure, such as hours of use of the underlying asset, and are contractually required under the terms of the lease agreement to be used to reimburse the lessee for required maintenance of the underlying asset on the completion of that maintenance. The lessor is contractually required to reimburse the lessee for the maintenance costs paid by the lessee, to the extent of the amounts on deposit. ##### [842-20-55-6](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:b362ddc8026253e1daf409c9ea38c0449ae5c5e5ccfa84f5d6d0bb9912fc698a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, the total cost of cumulative maintenance events over the term of the lease is less than the cumulative deposits, which results in excess amounts on deposit at the expiration of the lease. In those cases, some lease agreements provide that the lessor is entitled to retain such excess amounts, whereas other agreements specifically provide that, at the expiration of the lease agreement, such excess amounts are returned to the lessee (refundable maintenance deposit). ##### [842-20-55-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:3f8c301c6c56582acff04772ba78758e93a86e43453facdaebbfa69b798bf84e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraphs [842-20-55-8 through 55-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-8) does not apply to payments to a lessor that are not substantively and contractually related to maintenance of the leased asset. If 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 determines that it is less than [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that the total amount of payments will be returned to the lessee as a reimbursement for maintenance activities, the lessee should consider that when determining the portion of each payment that is not addressed by the guidance in paragraphs [842-20-55-8 through 55-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-8) . ##### [842-20-55-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:9d4d6c9659b43886f39b9f37dd06e9261c5a63ab23a0f7644701f023933012c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Maintenance deposits paid by a lessee under an arrangement accounted for as a lease that are refunded only if the lessee performs specified maintenance activities should be accounted for as a deposit asset. ##### [842-20-55-9](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:78dbe2b5ae8c456275ba351c5274e7ef01bf6f3398d37d03b29eba7d0f95d941 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lessee should evaluate whether it is probable that an amount on deposit recognized under paragraph [842-20-55-8](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-8) will be returned to reimburse the costs of the maintenance activities incurred by the lessee. When an amount on deposit is less than probable of being returned, it should be recognized in the same manner as variable lease expense. When the underlying maintenance is performed, the maintenance costs should be expensed or capitalized in accordance with the lessee's maintenance accounting policy. ##### [842-20-55-10](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:3a82395f12b2c28d52d2774f8238ab92f935be566875b1da1138e009d31aac2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") is a nonmonetary asset while 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.") is a [monetary liability](https://asc.understandingaccounting.org/glossary/m/#monetary-liability "An obligation to pay a sum of money the amount of which is fixed or determinable without reference to future prices of specific goods and services."). Therefore, in accordance with Subtopic 830-10 on foreign currency matters, when accounting for a [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.") that is denominated in a foreign currency, if remeasurement into the [lessee's](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.") functional currency is required, the lease liability is remeasured using the current exchange rate, while the right-of-use asset is remeasured using the exchange rate as of 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."). ##### [842-20-55-11](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:98361196994c1962ec2ed1f57a1ba3f93a5209a2e15267e1f7393a3d879198d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") should calculate the weighted-average 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 the basis of the remaining lease term and 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.") balance for each [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 of the reporting date. ##### [842-20-55-12](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:4fd72513a02e29bcbd48f24844a9e0baab7ef90acad639fd4de1f46d8fb0dcf5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The lessee should calculate the weighted-average discount rate on the basis of both of the following: 1. a 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.") that was used to calculate the lease liability balance for each lease as of the reporting date 2. b The remaining balance 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 each lease as of the reporting date. #### Illustrations ##### [842-20-55-13](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:db697b221a8d2f29264a3ef8f86e93b248e25df8f79987e7f33bcf49ec4b4a52 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 illustrates the assessment of whether a lease is a short-term lease. ##### [842-20-55-14](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:245b9cc29cb2208f2410bf7080f37ed32abb6ad2192fea2822b37357a0f766d8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases for any class of underlying asset. ##### [842-20-55-15](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:5ebd5261e9607d86251982dda512ceb8498870c2b0c32c39d88798d5b145facc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee enters into a 12-month lease of a vehicle, with an option to extend for another 12 months. Lessee has considered all relevant factors and determined that it is not reasonably certain to exercise the option to extend. Because at lease commencement Lessee is not reasonably certain to exercise the option to extend, the lease term is 12 months. ##### [842-20-55-16](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7010dbf0cb269825901de0401b4f166baf1dc40c7269bb4d58e7fb320ef3831b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The lease meets the definition of a short-term lease because the lease term is 12 months or less. Consequently, consistent with Lessee's accounting policy election, Lessee does not recognize the right-of-use asset and the lease liability arising from this lease. ##### [842-20-55-17](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:64f4bec4be9c51363acfbfed90ce421038611f8103627d4b829b8d8b2d1dc34c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 2 illustrates the determination of the discount rate for the lease. ##### [842-20-55-18](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:b5b7b4bcb4fa195aaef55bfa5aeb9f1acbe47c4a6eb2adb8798afde31b5ed588 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee, a public entity, is the parent of several consolidated subsidiaries. During the current period, 2 subsidiaries entered into a total of 400 individual leases of large computer servers, each with terms ranging between 4 and 5 years and annual payments ranging between $60,000 and $100,000, depending on the hardware capacity of the servers. In aggregate, total lease payments for these leases amount to $30 million. ##### [842-20-55-19](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:b0de1f497dcc054eba2e98fc343499a9d4e7609aa6dd60fda1c6f67e4749a63a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The individual lease contracts do not provide information about the rate implicit in the lease. Lessee is BBB credit rated and actively raises debt in the corporate bond market. Both subsidiaries are unrated and do not actively engage in treasury operations in their respective markets. On the basis of its credit rating and the collateral represented by the leased servers, Lessee's incremental borrowing rate on $60,000 through $100,000 (the range of lease payments on each of the 400 leases) would be approximately 4 percent. Lessee notes that 5-year zero-coupon U.S. Treasury instruments are currently yielding 1.7 percent (a risk-free rate). Because Lessee conducts its treasury operations centrally (that is, at the consolidated group level), it is reasonably assumed that consideration of the group credit standing factored into how each lease was priced. ##### [842-20-55-20](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:9a0f192e30857e0c42d72449d69cff1da86950024b1d7d8b0c031aa840eaef5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee may determine the discount rate for the lease for the 400 individual leases entered into on different dates throughout the current period by using a portfolio approach. That is, Lessee can apply a single discount rate to the portfolio of new leases. This is because during the period, the new leases are all of similar terms (four to five years), and Lessee's credit rating and the interest rate environment are stable. Because the pricing of the lease is influenced by the credit standing and profile of Lessee rather than the subsidiaries (that is, because Lessee conducts treasury operations for the consolidated group), Lessee concludes that its incremental borrowing rate of 4 percent is an appropriate discount rate for each of the 400 leases entered into by Lessee's 2 subsidiaries during the period. Because Lessee is a public entity, it is not permitted to use a risk-free discount rate. ##### [842-20-55-21](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:f01b004da29ae7dcdad1df6673483f453f5e46a5a50bf79411db1a5335b9e912 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 3 illustrates how a lessee would initially and subsequently measure right-of-use assets and lease liabilities and how a lessee would account for a change in the lease term. ##### [842-20-55-22](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:8ef158d135ec0eb9fa632e463eaf34656e4727bbcae3092f68c66aea304ad36e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee enters into a 10-year lease of an asset, with an option to extend for an additional 5 years. Lease payments are $50,000 per year during the initial term and $55,000 per year during the optional period, all payable at the beginning of each year. Lessee incurs initial direct costs of $15,000. ##### [842-20-55-23](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:baddf7536cbfd8828298e57eac19dd5ae04e0a4fe64876e9006dddb59c1dc3eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the commencement date, Lessee concludes that it is not reasonably certain to exercise the option to extend the lease and, therefore, determines the lease term to be 10 years. ##### [842-20-55-24](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:1c91afc31a6a55a850e25507ecd20a43d8aa121ae36252e07e702986b69e89ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate implicit in the lease is not readily determinable. Lessee's incremental borrowing rate is 5.87 percent, which reflects the fixed rate at which Lessee could borrow a similar amount in the same currency, for the same term, and with similar collateral as in the lease at the commencement date. ##### [842-20-55-25](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:a37c180c660d059fd83f1119498e1d53201e868303c6744f4e5b56c112563bab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the commencement date, Lessee makes the lease payment for the first year, incurs initial direct costs, and measures the lease liability at the present value of the remaining 9 payments of $50,000, discounted at the rate of 5.87 percent, which is $342,017. Lessee also measures a right-of-use asset of $407,017 (the initial measurement of the lease liability plus the initial direct costs and the lease payment for the first year). ##### [842-20-55-26](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:a62515f86b0b688290717e771e4859a830ccbd73f643fd170cea54ff4e02fdc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the first year of the lease, Lessee recognizes lease expense depending on how the lease is classified. Paragraphs [842-20-55-27 through 55-30](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-27) illustrate the lease expense depending on whether the lease is classified as a finance lease or as an operating lease. ##### [842-20-55-27](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:754569f99083f255197fb75c637c2835322388281965b351d574a9dca3079d74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee depreciates its owned assets on a straight-line basis. Therefore, the right-of-use asset would be amortized on a straight-line basis over the 10-year lease term. The lease liability is increased to reflect the Year 1 interest on the lease liability in accordance with the interest method. As such, in Year 1 of the lease, Lessee recognizes the amortization expense of $40,702 ($407,017 ÷ 10) and the interest expense of $20,076 (5.87% × $342,017). ##### [842-20-55-28](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:151b4b5ac1a4561118fa73349449b547ba05d3c1b36fa6572c75d14e95f6d35c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the first year of the lease, the carrying amount of Lessee's lease liability is $362,093 ($342,017 + $20,076), and the carrying amount of the right-of-use asset is $366,315 ($407,017 - $40,702). ##### [842-20-55-29](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:f99497a5044a984d388278602df3bc1b4ec64b1a2e84529f8f25dd113fb3938f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee determines the cost of the lease to be $515,000 (sum of the lease payments for the lease term and initial direct costs incurred by Lessee). The annual lease expense to be recognized is therefore $51,500 ($515,000 ÷ 10 years). ##### [842-20-55-30](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:824138889924a8748c53fa5f97f68a3d9e8d18af82f53ce482ba22f4da65aebf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the first year of the lease, the carrying amount of Lessee's lease liability is $362,093 ($342,017 + $20,076), and the carrying amount of the right-of-use asset is $375,593 (the carrying amount of the lease liability plus the remaining initial direct costs, which equal $13,500). ##### [842-20-55-31](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:0228ece517a36dd6321a10a04689dae9c8941da9e596142c82c71d48a575dcd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of Year 6 of the lease, Lessee makes significant leasehold improvements. Those improvements are expected to have significant economic value for Lessee at the end of the original lease term of 10 years. The improvements result in the underlying asset having greater utility to Lessee than alternative assets that could be leased for a similar amount and that are expected to have significant economic life beyond the original lease term. Consequently, construction of the leasehold improvements is deemed a significant event or significant change in circumstances that directly affects whether Lessee is reasonably certain to exercise the option to extend the lease and triggers a reassessment of the lease term. Upon reassessing the lease term, at the end of Year 6, Lessee concludes that it is reasonably certain to exercise the option to extend the lease for five years. Taking into consideration the extended remaining lease term, Lessee's incremental borrowing rate at the end of Year 6 is 7.83 percent. As a result of Lessee's remeasuring the remaining lease term to nine years, Lessee also would remeasure any variable lease payments that depend on an index or a rate; however, in this Example, there are no variable lease payments that depend on an index or a rate. In accordance with paragraph [842-10-25-1](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-1), Lessee reassesses the lease classification as a result of the change in the lease term. Assume for purposes of this Example that the reassessment does not change the classification of the lease from that determined at the commencement date. ##### [842-20-55-32](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7d29bd6997a5c6d095baf1eb9e6bb8dcf0bead97ee06d0853ad72312584ae95e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of Year 6, before accounting for the change in the lease term, the lease liability is $183,973 (present value of 4 remaining payments of $50,000, discounted at the rate of 5.87 percent). Lessee's right-of-use asset is $162,807 if the lease is classified as a finance lease or $189,973 if the lease is classified as an operating lease (the balance of the remeasured lease liability at the end of Year 6 plus the remaining initial direct costs of $6,000). ##### [842-20-55-33](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:43c86eefaebd446b627f07b826455945da9d7ba524e432ce66f6fa9660b68d77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee remeasures the lease liability, which is now equal to the present value of 4 payments of $50,000 followed by 5 payments of $55,000, all discounted at the rate of 7.83 percent, which is $355,189. Lessee increases the lease liability by $171,216, representing the difference between the remeasured liability and its current carrying amount ($355,189 - $183,973). The corresponding adjustment is made to the right-of-use asset to reflect the cost of the additional rights. ##### [842-20-55-34](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:2d139555f390db3a653999f7422018e3d93e62befa87a49f6fd2d8cff627adbd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Following the adjustment, the carrying amount of Lessee's right-of-use asset is $334,023 if the lease is a finance lease (that is, $162,807 + $171,216) or $361,189 if the lease is an operating lease (that is, $189,973 + $171,216). ##### [842-20-55-35](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7c9cbd918f4ca5b8a94c01dd559f86dafd76287ec258058ae0778f20f5cc91aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee then makes the $50,000 lease payment for Year 7, reducing the lease liability to $305,189 ($355,189 - $50,000), regardless of how the lease is classified. ##### [842-20-55-36](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:71d71b980ec4b4b8fa209aa00895e881f9d7e95097130ed924c5f94e8d38e552 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee recognizes lease expense in Year 7 as follows, depending on how the lease had been classified at the commencement date. ##### [842-20-55-37](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7f7934449e8d5358d18c7249656237b0c0115a7be22f80dc139baae2daac0540 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee depreciates its owned assets on a straight-line basis. Therefore, the right-of-use asset will be amortized on a straight-line basis over the lease term. The lease liability will be reduced in accordance with the interest method. As such, in Year 7 (the first year following the remeasurement), Lessee recognizes amortization expense of $37,114 ($334,023 ÷ 9) and interest expense of $23,896 (7.83% × $305,189). ##### [842-20-55-38](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-38) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7929969aebff4b553b596f463c56e6158a2afbd10f76c58ef7ea4a330cead93a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee determines the remaining cost of the lease as the sum of the following: 1. a The total lease payments, as adjusted for the remeasurement, which is the sum of $500,000 (10 payments of $50,000 during the initial lease term) and $275,000 (5 payments of $55,000 during the term of the lease extension); plus 2. b The total initial direct costs attributable to the lease of $15,000; minus 3. c The periodic lease cost recognized in prior periods of $309,000. ##### [842-20-55-39](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-39) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7ed5c8d0c351a6bf16a6a9ed863dd904665ccd254949eb4e94a48661218bddc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the remaining cost of the lease is therefore $481,000 ($775,000 + $15,000 - $309,000). Consequently, Lessee determines that the annual expense to be recognized throughout the remainder of the lease term is $53,444 ($481,000 ÷ the remaining lease term of 9 years). ##### [842-20-55-40](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-40) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:d627d9fda06c9ae7f7eea4578d799a1de720297152c048d5d40ab7be8ed9f9cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 4 illustrates how a lessee would recognize lease cost in an operating lease and initially and subsequently measure right-of-use assets and lease liabilities for that lease. ##### [842-20-55-41](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-41) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7beffeda87b30a253e77fa9959416fbf993b0ef509115dbfa4942670ef215f67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee enters into a 10-year lease for 5,000 square feet of office space. The annual lease payment is $10,000, paid in arrears, and increases 5 percent each year during the lease term. Lessee's incremental borrowing rate at lease commencement is 6 percent. Lessee classifies the lease as an operating lease in accordance with paragraphs [842-10-25-2 through 25-3](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-2) . Lessee incurs initial direct costs of $5,000. ##### [842-20-55-42](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-42) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:f556ae33c8570ca69eeb7624e3590902c5083f926d6ee721594c90521304901d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the commencement date, Lessee receives a $10,000 cash payment from Lessor that Lessee accounts for as a lease incentive. Lessee measures the lease liability at the present value of the 10 remaining lease payments ($10,000 in Year 1, increasing by 5 percent each year thereafter), discounted at the rate of 6 percent, which is $90,434. Lessee also measures a right-of-use asset of $85,434 (the initial measurement of the lease liability + the initial direct costs of $5,000 - the lease incentive of $10,000). ##### [842-20-55-43](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-43) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:603d2927139958615a083b4d0c23f8c47d02a2e3ed9d3362d1fc525ab9e740a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the first year of the lease, Lessee determines the remaining cost of the lease as the sum of the following: 1. a The total lease payments of $115,779 (the sum of the 10 escalating payments to Lessor during the lease term of $125,779 − the lease incentive paid to Lessee at the commencement date of $10,000) 2. b The total initial direct costs attributable to the lease of $5,000. The amount of the remaining lease cost is therefore $120,779 ($115,779 + $5,000). Consequently, Lessee determines that the single lease cost to be recognized every year throughout the lease term is $12,078 ($120,779 ÷ 10 years). This assumes that there are no remeasurements of the lease liability or modifications to the lease throughout the lease term. ##### [842-20-55-44](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-44) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:c69ad7ecde579a4c3e2651c685aac35ef1f5e28e8d63171b1c556561e1ee2d1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of Year 1, the carrying amount of the lease liability is $85,860 (9 remaining lease payments, discounted at the rate of 6 percent), and the carrying amount of the right-of-use asset is the amount of the liability, adjusted for the following: 1. a Accrued lease payments of $2,578 (the amount of payments to Lessor to be recognized as part of the single lease cost each year during the lease of $12,578 \[total payments to Lessor of $125,779 ÷ 10 years\] − the first year's lease payment of $10,000) 2. b Unamortized initial direct costs of $4,500 (gross initial direct costs of $5,000 - amounts recognized previously as part of the single lease cost of $500 \[total initial direct costs of $5,000 ÷ 10 years\]) 3. c The remaining balance of the lease incentive of $9,000 (gross lease incentive of $10,000 - amounts recognized previously as part of the single lease cost of $1,000 \[total lease incentives of $10,000 ÷ 10 years\]). Therefore, at the end of Year 1, Lessee measures the right-of-use asset at the amount of $78,782 ($85,860 - $2,578 + $4,500 - $9,000). ##### [842-20-55-45](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-45) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:75f3bd7d6353ac1633245290821d010b0c20a38aa35045cec0678d772dd61557 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the beginning of Year 2, Lessee determines the remaining cost of the lease to be $108,701 (the total lease payments of $115,779 + the total initial direct costs of $5,000 - the single lease cost recognized in Year 1 of $12,078). The single lease cost to be recognized in Year 2 is still $12,078 ($108,701 ÷ 9 years). For the purposes of the Example, only the first two years' determination of the single lease cost are shown. However, the single lease cost will be determined in the same way as in Years 1 and 2 for the remainder of the lease and, in this Example, will continue to equal $12,078 every period for the remainder of the lease term assuming that there are no remeasurements of the lease liability or modifications to the lease. ##### [842-20-55-46](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-46) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:379dee8dc917ac4563160377d009b37bb952cf8e88184c3fd648de43cb59e1f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of Year 2, the carrying amount of the lease liability is $80,511, and the carrying amount of the right-of-use asset is $71,855 (the carrying amount of the lease liability of $80,511 - the accrued lease payments of $4,656 + the unamortized initial direct costs of $4,000 - the remaining balance of the lease incentive received of $8,000). For the purposes of the Example, the subsequent measurement of the lease liability and the subsequent measurement of the right-of-use asset are shown only for the first two years. However, Lessee will continue to measure the lease liability and the right-of-use asset for this lease in the same manner throughout the remainder of the lease term. ##### [842-20-55-47](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-47) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:4dbf63c80e16706790fef63ab9da27c235cd45f84bff30a01ebfb4a6fc17674b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 5 illustrates impairment of a right-of-use asset. ##### [842-20-55-48](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-48) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:0cacceb5d3a8d597bbf4d0d4a7a69d4cecc199b77101dd6bff252b7400846a81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Lessee enters into a 10-year lease of a nonspecialized asset. Lease payments are $10,000 per year, payable in arrears. The lease does not transfer ownership of the underlying asset or grant Lessee an option to purchase the underlying asset. At lease commencement, the remaining economic life of the underlying asset is 50 years, and the fair value of the underlying asset is $600,000. Lessee does not incur any initial direct costs as a result of the lease. Lessee's incremental borrowing rate is 7 percent, which reflects the fixed rate at which Lessee could borrow the amount of the lease payments in the same currency, for the same term, and with similar collateral as in the lease at commencement. The lease is classified as an operating lease. ##### [842-20-55-49](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-49) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:39cced1fda0f82f050726abdc6440ba1cb2ad75ba7211ea912a49b57ad534517 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the commencement date, Lessee recognizes the lease liability of $70,236 (the present value of the 10 lease payments of $10,000, discounted at the rate of 7 percent). Lessee also recognizes a right-of-use asset of $70,236 (the initial measurement of the lease liability). Lessee determines the cost of the lease to be $100,000 (the total lease payments for the lease term). The annual lease expense to be recognized is therefore $10,000 ($100,000 ÷ 10 years). ##### [842-20-55-50](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-50) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:7974125da56a59dd5f7535b8aa3b7da98eef9edc1e81bc8e4ad670fe89f75b7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of Year 3, when the carrying amount of the lease liability and the right-of-use asset are both $53,893, Lessee determines that the right-of-use asset is impaired in accordance with Section 360-10-35 and recognizes an impairment loss of $35,000. The right-of-use asset is part of an asset group that Lessee tested for recoverability because of a significant adverse change in the business climate that affects Lessee's ability to derive benefit from the assets within the asset group. The portion of the total impairment loss for the asset group allocated to the right-of-use asset in accordance with paragraph [360-10-35-28](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-28) is $35,000. After the impairment charge, the carrying amount of the right-of-use asset at the end of Year 3 is $18,893 ($53,893 - $35,000). Because of the impairment, the total expense recognized in Year 3 is $45,000 ($10,000 in lease expense + the $35,000 impairment charge). Beginning in Year 4, and for the remainder of the lease term, the single lease cost recognized by Lessee in accordance with paragraphs [842-20-25-6(a)](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-6) and [842-20-25-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-25-7) will equal the sum of the following: 1. a Amortization of the right-of-use asset remaining after the impairment ($18,893 ÷ 7 years = $2,699 per year) 2. b Accretion of the lease liability. For example, in Year 4, the accretion is $3,773 ($53,893 × 7%) and, in Year 5, the accretion is $3,337 ($47,665 × 7%). ##### [842-20-55-51](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-51) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:46ce93e45d23609768c9bb38d18424767f7841507ea3edeea8b57cb26d1169e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, at the end of Year 4, the carrying amount of the lease liability is $47,665 (that is, calculated as either the present value of the remaining lease payments, discounted at 7 percent, or the previous balance of $53,893 - $10,000 Year 4 lease payment + the $3,773 accretion of the lease liability). The carrying amount of the right-of-use asset is $16,194 (the previous balance of $18,893 - $2,699 amortization). Lessee measures the lease liability and the right-of-use asset in this manner throughout the remainder of the lease term. ##### [842-20-55-52](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-52) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:b6cdda5987051b381ec2cadd91e2bd2ebcd2efe6c8f5c04ed11cb3467e0b7a0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 6 illustrates how a lessee may meet the quantitative disclosure requirements in paragraph [842-20-50-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-4). ##### [842-20-55-53](https://asc.understandingaccounting.org/asc/842/20/#842-20-55-53) Pending content: no Source downloaded (UTC): 2026-09-10T01:56:58.743Z to 2026-09-10T01:56:58.743Z Record version: sha256:006e840b2a37be96896f23d47bf870432bed70171d68ec8c96670857f89ab681 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates how a lessee may meet the quantitative disclosure requirements in paragraph [842-20-50-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-4). - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-A36B10C9-C8FC-424E-A406-F2DF6D2A1AE0-low.gif) "Year Ending December 31," 20X2 20X1 Lease cost Finance lease cost: $XXX $XXX Amortization of right-of-use assets XXX XXX Interest on lease liabilities XXX XXX Operating lease cost XXX XXX Short-term lease cost XXX XXX Variable lease cost XXX XXX Sublease income (XXX) (XXX) Total lease cost $XXX $XXX Other information "(Gains) and losses on sale and leaseback transactions, net" $(XXX) $XXX Cash paid for amounts included in the measurement of lease liabilities XXX XXX Operating cash flows from finance leases XXX XXX Operating cash flows from operating leases XXX XXX Financing cash flows from finance leases XXX XXX Right-of-use assets obtained in exchange for new finance lease liabilities XXX XXX Right-of-use assets obtained in exchange for new operating lease liabilities XXX XXX Weighted-average remaining lease term—finance leases X.X years X.X years Weighted-average remaining lease term—operating leases X.X years X.X years Weighted-average discount rate—finance leases X.X% X.X% Weighted-average discount rate—operating leases X.X% X.X%