# ASC 842-30-25: Leases — Lessor — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/30/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:10ee5c2336028bcc1a0125cc2892596ad2bc39d3b30b7788f66ab1920c4962d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/842/30/#25-recognition) SEC content: no #### Sales-Type Leases ##### [842-30-25-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:b0005268baf2a54e73511e0584f506fd9e6ba2f6cddad050931a0ab5a1604879 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 [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.") shall recognize each of the following and derecognize 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.") in accordance with paragraph [842-30-40-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-40-1): 1. a A [net investment in the lease](https://asc.understandingaccounting.org/glossary/n/#net-investment-in-the-lease "For a sales-type lease, the sum of the lease receivable and the unguaranteed residual asset. For a direct financing lease, the sum of the lease receivable and the unguaranteed residual asset, net of any deferred selling profit."), measured in accordance with paragraph [842-30-30-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-30-1) 2. b [Selling profit or selling loss](https://asc.understandingaccounting.org/glossary/s/#selling-profit-or-selling-loss "At the commencement date, selling profit or selling loss equals: The fair value of the underlying asset or the sum of (1) the lease receivable and (2) any lease payments prepaid by the lessee, if lower; minus The carrying amount of the underlying asset net of any unguaranteed residual asset; minus Any deferred initial direct costs of the lessor.") arising from 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.") 3. c [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.") as an expense if, at the commencement date, the [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.") 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](https://asc.understandingaccounting.org/asc/842/10/#842-10-30-9) ) are deferred at the commencement date and included in the measurement of the net investment in the lease. 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.") 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. ##### [842-30-25-2](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:30b9d42145d91288f26650a62ff7ad6281e1d6df16972e1ad11b99cf2c113ef5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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)](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-1) 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.") 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](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3)). ##### [842-30-25-3](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:b9167c5db3343a6ff06c3490f1868437a97860e7805d6435e5a9c50985be56d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraphs [842-30-25-1 through 25-2](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-1) notwithstanding, if collectibility 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."), plus any amount necessary to satisfy 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.") provided 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 [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") 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](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") 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. ##### [842-30-25-4](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:a5df04e7f5ca20f9fed9938ddf3564a3bda0540b8a1bfdbcbb8776d76400f158 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When collectibility is not probable at the commencement date, at the date the criterion in paragraph [842-30-25-3(a)](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-3) 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](https://asc.understandingaccounting.org/asc/842/30/#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](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."), 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](https://asc.understandingaccounting.org/glossary/l/#lease-receivable "A lessor's right to receive lease payments arising from a sales-type lease or a direct financing lease plus any amount that a lessor expects to derive from the underlying asset following the end of the lease term to the extent that it is guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis."); 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](https://asc.understandingaccounting.org/glossary/u/#unguaranteed-residual-asset "The amount that a lessor expects to derive from the underlying asset following the end of the lease term that is not guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis."). ##### [842-30-25-5](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:1b5c1fe1c6b5b80a2e280031bdc6e1e193d6d0488873b7be5b9f3b30d27b23b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When collectibility is not probable at the commencement date, at the date the criterion in paragraph [842-30-25-3(b)](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-3) is met, the lessor shall derecognize the carrying amount of any deposit liability recognized in accordance with paragraph [842-30-25-3](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-3), with the corresponding amount recognized as lease income. ##### [842-30-25-6](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:bf981b2c2ed4eaa9ea52a7edeca30fba49b35647ad596b799498aaf3188dd7d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If collectibility is probable at the commencement date for 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 for a [direct financing lease](https://asc.understandingaccounting.org/glossary/d/#direct-financing-lease "From the perspective of a lessor, a lease that meets none of the criteria in paragraph 842-10-25-2 but meets the criteria in paragraph 842-10-25-3(b)and is not an operating lease in accordance with paragraph 842-10-25-3A."), 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](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3). #### Direct Financing Leases ##### [842-30-25-7](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:679c394e5a76d23bd8d704fbd06b56401945cdb5f0d55e279b56f3b5c67bb8fc 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 [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.") shall recognize both of the following and derecognize 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.") in accordance with paragraph [842-30-40-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-40-1): 1. a A [net investment in the lease](https://asc.understandingaccounting.org/glossary/n/#net-investment-in-the-lease "For a sales-type lease, the sum of the lease receivable and the unguaranteed residual asset. For a direct financing lease, the sum of the lease receivable and the unguaranteed residual asset, net of any deferred selling profit."), measured in accordance with paragraph [842-30-30-2](https://asc.understandingaccounting.org/asc/842/30/#842-30-30-2) 2. b Selling loss arising from 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."), if applicable. ##### [842-30-25-8](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:dc5709d56cc344ed7e84df89044e2c450e531a10d0a990af8c9ded85bf3b7339 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Selling profit and [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.") (see paragraphs [842-10-30-9 through 30-10](https://asc.understandingaccounting.org/asc/842/10/#842-10-30-9) ) are deferred at the commencement date and included in the measurement of the net investment in the lease. 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.") 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. ##### [842-30-25-9](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:2c7d4c939c7fb9f58546ad238f227ef347ee00af4e7384e3bc7c4accc448dbeb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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)](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-1) 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.") 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](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3)). #### Operating Leases ##### [842-30-25-10](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:a585f14cbe0628fafaf182a7cf890e8ec8b57fa2fa816091ea01f9f3b3deccd5 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 [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.") shall defer [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."). ##### [842-30-25-11](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:7e1198e9aeb733fd963bc9f2cf868c7daaf8e5919e1284d3686cb8ab3ac3216a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the commencement date, a lessor shall recognize all of the following: 1. a 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 income in profit or loss 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.") 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](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."), subject to paragraph [842-30-25-12](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-12) 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.") 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)). ##### [842-30-25-12](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:8da8263f8586ef298a519084602d0796ca84d3a273e710a43fcf0ef9d9938a38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If collectibility of the lease payments plus any amount necessary to satisfy 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.") (provided 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.") or any other unrelated third party) is not [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") 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)](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-11) or the lease payments, including variable lease payments, that have been collected from the lessee. ##### [842-30-25-13](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:e68488c411ce898c60db4390ff88cbdeded67e83f8fe86e7f71193758b8049d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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)](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-11) 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. ##### [842-30-25-14](https://asc.understandingaccounting.org/asc/842/30/#842-30-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:15.916Z to 2026-09-10T01:57:15.916Z Record version: sha256:5d79ab7aabe69c6844d9eef26073858e7a842b3ad69ba3086c3473a62c8d09de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1 (paragraphs [842-30-55-18 through 55-43](https://asc.understandingaccounting.org/asc/842/30/#842-30-55-18) ) for an illustration of the requirements when collectibility is not probable.