{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/842/30/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"842","topic_title":"Leases","subtopic":"842-30","subtopic_title":"Lessor","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Sales-Type Leases","paragraphs":[{"citation":"842-30-25-1","para":"25-1","html":"
At the commencement date, a lessor shall recognize each of the following and derecognize the underlying asset in accordance with paragraph 842-30-40-1:
  1. a
    A net investment in the lease, measured in accordance with paragraph 842-30-30-1
  2. b
    Selling profit or selling loss arising from the lease
  3. c
    Initial direct costs as an expense if, at the commencement date, the fair value of the underlying asset is different from its carrying amount. If the fair value of the underlying asset equals its carrying amount, initial direct costs (see paragraphs
    842-10-30-9 through 30-10
    ) are deferred at the commencement date and included in the measurement of the net investment in the lease. The rate implicit in the lease is defined in such a way that those initial direct costs eligible for deferral are included automatically in the net investment in the lease; there is no need to add them separately.
","snippet":"At the commencement date, a lessor shall recognize each of the following and derecognize the underlying asset in accordance with paragraph 842-30-40-1:\n(a) A net investment in the lease, measured in accordance with parag…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0005268baf2a54e73511e0584f506fd9e6ba2f6cddad050931a0ab5a1604879","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-2","para":"25-2","html":"
After the commencement date, a lessor shall recognize all of the following:
  1. a
    Interest income on the net investment in the lease, measured in accordance with paragraph 842-30-35-1(a)
  2. b
    Variable lease payments that are not included in the net investment in the lease as income in profit or loss in the period when the changes in facts and circumstances on which the variable lease payments are based occur
  3. c
    Credit losses on the net investment in the lease (as described in paragraph 842-30-35-3).
","snippet":"After the commencement date, a lessor shall recognize all of the following:\n(a) Interest income on the net investment in the lease, measured in accordance with paragraph 842-30-35-1(a)\n(b) Variable lease payments that ar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30b9d42145d91288f26650a62ff7ad6281e1d6df16972e1ad11b99cf2c113ef5","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-3","para":"25-3","html":"
The guidance in paragraphs
842-30-25-1 through 25-2
notwithstanding, if collectibility of the lease payments, plus any amount necessary to satisfy a residual value guarantee provided by the lessee, is not probable at the commencement date, the lessor shall not derecognize the underlying asset but shall recognize lease payments received—including variable lease payments—as a deposit liability until the earlier of either of the following:
  1. a
    Collectibility of the lease payments, plus any amount necessary to satisfy a residual value guarantee provided by the lessee, becomes probable. If collectibility is not probable at the commencement date, a lessor shall continue to assess collectibility to determine whether the lease payments and any amount necessary to satisfy a residual value guarantee are probable of collection.
  2. b
    Either of the following events occurs:
    1. 1
      The contract has been terminated, and the lease payments received from the lessee are nonrefundable.
    2. 2
      The lessor has repossessed the underlying asset, it has no further obligation under the contract to the lessee, and the lease payments received from the lessee are nonrefundable.
","snippet":"The guidance in paragraphs 842-30-25-1 through 25-2 notwithstanding, if collectibility of the lease payments, plus any amount necessary to satisfy a residual value guarantee provided by the lessee, is not probable at the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9167c5db3343a6ff06c3490f1868437a97860e7805d6435e5a9c50985be56d6","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-4","para":"25-4","html":"
When collectibility is not probable at the commencement date, at the date the criterion in paragraph 842-30-25-3(a) is met (that is, the date at which collectibility of the lease payments plus any amount necessary to satisfy a residual value guarantee provided by the lessee is assessed as probable), the lessor shall do all of the following:
  1. a
    Derecognize the carrying amount of the underlying asset
  2. b
    Derecognize the carrying amount of any deposit liability recognized in accordance with paragraph 842-30-25-3
  3. c
    Recognize a net investment in the lease on the basis of the remaining lease payments and remaining lease term, using the rate implicit in the lease determined at the commencement date
  4. d
    Recognize selling profit or selling loss calculated as:
    1. 1
      The lease receivable; plus
    2. 2
      The carrying amount of the deposit liability; minus
    3. 3
      The carrying amount of the underlying asset, net of the unguaranteed residual asset.
","snippet":"When collectibility is not probable at the commencement date, at the date the criterion in paragraph 842-30-25-3(a) is met (that is, the date at which collectibility of the lease payments plus any amount necessary to sat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5df04e7f5ca20f9fed9938ddf3564a3bda0540b8a1bfdbcbb8776d76400f158","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-5","para":"25-5","html":"
When collectibility is not probable at the commencement date, at the date the criterion in paragraph 842-30-25-3(b) is met, the lessor shall derecognize the carrying amount of any deposit liability recognized in accordance with paragraph 842-30-25-3, with the corresponding amount recognized as lease income.
","snippet":"When collectibility is not probable at the commencement date, at the date the criterion in paragraph 842-30-25-3(b) is met, the lessor shall derecognize the carrying amount of any deposit liability recognized in accordan…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b5c1fe1c6b5b80a2e280031bdc6e1e193d6d0488873b7be5b9f3b30d27b23b3","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-6","para":"25-6","html":"
If collectibility is probable at the commencement date for a sales-type lease or for a direct financing lease, a lessor shall not reassess whether collectibility is probable. Subsequent changes in the credit risk of the lessee shall be accounted for in accordance with the credit loss guidance applicable to the net investment in the lease in paragraph 842-30-35-3.
","snippet":"If collectibility is probable at the commencement date for a sales-type lease or for a direct financing lease, a lessor shall not reassess whether collectibility is probable. Subsequent changes in the credit risk of the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf981b2c2ed4eaa9ea52a7edeca30fba49b35647ad596b799498aaf3188dd7d1","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:327165edd92283c6b2e55ae4cbd2286f34b0d7a0cf8036bcd9d13ddc884d5468","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"block":null,"heading":"Direct Financing Leases","paragraphs":[{"citation":"842-30-25-7","para":"25-7","html":"
At the commencement date, a lessor shall recognize both of the following and derecognize the underlying asset in accordance with paragraph 842-30-40-1:
  1. a
    A net investment in the lease, measured in accordance with paragraph 842-30-30-2
  2. b
    Selling loss arising from the lease, if applicable.
","snippet":"At the commencement date, a lessor shall recognize both of the following and derecognize the underlying asset in accordance with paragraph 842-30-40-1:\n(a) A net investment in the lease, measured in accordance with parag…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:679c394e5a76d23bd8d704fbd06b56401945cdb5f0d55e279b56f3b5c67bb8fc","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-8","para":"25-8","html":"
Selling profit and initial direct costs (see paragraphs
842-10-30-9 through 30-10
) are deferred at the commencement date and included in the measurement of the net investment in the lease. The rate implicit in the lease is defined in such a way that initial direct costs deferred in accordance with this paragraph are included automatically in the net investment in the lease; there is no need to add them separately.
","snippet":"Selling profit and initial direct costs (see paragraphs 842-10-30-9 through 30-10) are deferred at the commencement date and included in the measurement of the net investment in the lease. The rate implicit in the lease …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc5709d56cc344ed7e84df89044e2c450e531a10d0a990af8c9ded85bf3b7339","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-9","para":"25-9","html":"
After the commencement date, a lessor shall recognize all of the following:
  1. a
    Interest income on the net investment in the lease, measured in accordance with paragraph 842-30-35-1(a)
  2. b
    Variable lease payments that are not included in the net investment in the lease as income in profit or loss in the period when the changes in facts and circumstances on which the variable lease payments are based occur
  3. c
    Credit losses on the net investment in the lease (as described in paragraph 842-30-35-3).
","snippet":"After the commencement date, a lessor shall recognize all of the following:\n(a) Interest income on the net investment in the lease, measured in accordance with paragraph 842-30-35-1(a)\n(b) Variable lease payments that ar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c7d4c939c7fb9f58546ad238f227ef347ee00af4e7384e3bc7c4accc448dbeb","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cff1c768cc7b8162602ad7cc094692d5f2af3b493f38b685745174225cee9dae","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"block":null,"heading":"Operating Leases","paragraphs":[{"citation":"842-30-25-10","para":"25-10","html":"
At the commencement date, a lessor shall defer initial direct costs.
","snippet":"At the commencement date, a lessor shall defer initial direct costs.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a585f14cbe0628fafaf182a7cf890e8ec8b57fa2fa816091ea01f9f3b3deccd5","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-11","para":"25-11","html":"
After the commencement date, a lessor shall recognize all of the following:
  1. a
    The lease payments as income in profit or loss over the lease term 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 use of the underlying asset, subject to paragraph 842-30-25-12
  2. b
    Variable lease payments as income in profit or loss in the period in which the changes in facts and circumstances on which the variable lease payments are based occur
  3. c
    Initial direct costs as an expense over the lease term on the same basis as lease income (as described in (a)).
","snippet":"After the commencement date, a lessor shall recognize all of the following:\n(a) The lease payments as income in profit or loss over the lease term on a straight-line basis unless another systematic and rational basis is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e1198e9aeb733fd963bc9f2cf868c7daaf8e5919e1284d3686cb8ab3ac3216a","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-12","para":"25-12","html":"
If collectibility of the lease payments plus any amount necessary to satisfy a residual value guarantee (provided by the lessee or any other unrelated third party) is not probable at the commencement date, lease income shall be limited to the lesser of the income that would be recognized in accordance with paragraph 842-30-25-11(a) through (b) or the lease payments, including variable lease payments, that have been collected from the lessee.
","snippet":"If collectibility of the lease payments plus any amount necessary to satisfy a residual value guarantee (provided by the lessee or any other unrelated third party) is not probable at the commencement date, lease income s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8da8263f8586ef298a519084602d0796ca84d3a273e710a43fcf0ef9d9938a38","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-13","para":"25-13","html":"
If the assessment of collectibility changes after the commencement date, any difference between the lease income that would have been recognized in accordance with paragraph 842-30-25-11(a) through (b) and the lease payments, including variable lease payments, that have been collected from the lessee shall be recognized as a current-period adjustment to lease income.
","snippet":"If the assessment of collectibility changes after the commencement date, any difference between the lease income that would have been recognized in accordance with paragraph 842-30-25-11(a) through (b) and the lease paym…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e68488c411ce898c60db4390ff88cbdeded67e83f8fe86e7f71193758b8049d1","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},{"citation":"842-30-25-14","para":"25-14","html":"
See Example 1 (paragraphs
842-30-55-18 through 55-43
) for an illustration of the requirements when collectibility is not probable.
","snippet":"See Example 1 (paragraphs 842-30-55-18 through 55-43) for an illustration of the requirements when collectibility is not probable.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d79ab7aabe69c6844d9eef26073858e7a842b3ad69ba3086c3473a62c8d09de","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:612cdb45082b2e22b4d5f9e2d2c59fac293027e45d96ae99a24144ae57c8fc38","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10ee5c2336028bcc1a0125cc2892596ad2bc39d3b30b7788f66ab1920c4962d9","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10ee5c2336028bcc1a0125cc2892596ad2bc39d3b30b7788f66ab1920c4962d9","downloaded_from":"2026-09-10T01:57:15.916Z","last_downloaded_at":"2026-09-10T01:57:15.916Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479341","source_sha256":"b44663d4901d4f29bab1008cc7e852ca5a52b4cc97da4a5dbeccf40d30437588"}}