# ASC 842-50-25: Leases — Leveraged Lease Arrangements — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/842/50/#25-recognition)

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## ASC 842-50-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/842/50/#25-recognition)

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##### [842-50-25-1](https://asc.understandingaccounting.org/asc/842/50/#842-50-25-1)

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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 record its investment in a [leveraged lease](https://asc.understandingaccounting.org/glossary/l/#leveraged-lease "From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date."). The net of the balances of the following accounts as measured in accordance with this Subtopic shall represent the lessor's initial and continuing investment in leveraged leases:

1.  a
    
    Rentals receivable
    
2.  b
    
    Investment-tax-credit receivable
    
3.  c
    
    [Estimated residual value](https://asc.understandingaccounting.org/glossary/e/#estimated-residual-value "The estimated fair value of the leased property at the end of the lease term.") of the leased asset
    
4.  d
    
    Unearned and deferred income.

#### Leveraged Lease Acquired in a Business Combination or an Acquisition by a Not-for-Profit Entity

##### [842-50-25-2](https://asc.understandingaccounting.org/asc/842/50/#842-50-25-2)

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In a business combination or 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."), the acquiring entity shall retain the classification of the acquired entity's investment as 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.") in a [leveraged lease](https://asc.understandingaccounting.org/glossary/l/#leveraged-lease "From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.") at the date of the combination. The net investment of the acquired leveraged lease shall be disaggregated into its component parts, namely net rentals receivable, [estimated residual value](https://asc.understandingaccounting.org/glossary/e/#estimated-residual-value "The estimated fair value of the leased property at the end of the lease term."), and unearned income including discount to adjust other components to present value.