# ASC 842-30-35: Leases — Lessor — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/30/#35-subsequent-measurement) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:697bdf6c49be46ab0410979710b735b95a97e3eed7ea8dafedf1211aafd875b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/842/30/#35-subsequent-measurement) SEC content: no #### Sales-Type and Direct Financing Leases ##### [842-30-35-1](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:2526c2e49e3cc1cc6532240ed643454248a49a2f278badec6997bb1c398c3210 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 [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 measure the [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.") by doing both of the following: 1. a Increasing the carrying amount to reflect the interest income on the net investment in the lease. A lessor shall determine the interest income on the net investment in the lease 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 net investment in the lease. 2. b 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.") collected during the period. ##### [842-30-35-2](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:664a2588399d84e5cf5148832b86652782dd941d352e7f5763452dcd37a77e86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the commencement date, a lessor shall not remeasure the net investment in the lease 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.") is modified and that modification is not accounted for as a separate [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") in accordance with paragraph [842-10-25-8](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-8). ##### [842-30-35-3](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:a16acf3a9c7de0350271200fe4576baae338bd8df5d55a0ae09c88ccee4499f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 determine the loss allowance related to the [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.") and shall record any loss allowance in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. When determining the loss allowance for a net investment in the lease, a lessor shall take into consideration the collateral relating to the net investment in the lease. The collateral relating to the net investment in the lease represents the cash flows that the lessor would expect to receive (or derive) from 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.") and 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.") during and following the end 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."). ##### [842-30-35-4](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:5f355000002d442b54189a5646c97fbac9dff290a986e188b3c52e7cd2be2a62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If 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.") sells substantially all of 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.") associated with 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-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.") and retains an interest in 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."), the lessor shall not continue to accrete the unguaranteed residual asset to its estimated value 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."). The lessor shall report any remaining unguaranteed residual asset thereafter at its carrying amount at the date of the sale of the lease receivable and apply Topic 360 on property, plant, and equipment to determine whether the unguaranteed residual asset is impaired. ##### [842-30-35-5](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:15de3493ae9ea102d32efd72cb96938376629be670f80247933e7bffe5f39732 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At 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."), 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 reclassify the [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.") to the appropriate category of asset (for example, property, plant, and equipment) in accordance with other Topics, measured at the carrying amount of the net investment in the lease. The lessor shall account for 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.") that was the subject 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.") in accordance with other Topics. #### Operating Leases ##### [842-30-35-6](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:c9d35c69025e6fcf716ee5adaf3abc4f4f5d97caca1545af4e41ab25652e5ef3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 continue to measure, including testing for impairment in accordance with Section 360-10-35 on impairment or disposal of long-lived assets, 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 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.") in accordance with other Topics. #### Subleases ##### [842-30-35-7](https://asc.understandingaccounting.org/asc/842/30/#842-30-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:19.752Z to 2026-09-10T01:57:19.752Z Record version: sha256:2956b0091f3968d1c46481c080473b1ebed4c7fbdd99e547b5afa92eab4be35e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If 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.") enters into 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.") or 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.") agreement is sold or transferred by the original lessee to a third party, the original [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 continue to account for the lease as it did before.