# ASC 842-980-45: Leases — Regulated Operations — 45 Other Presentation Matters Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/980/#45-other-presentation-matters) 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): 2026-09-10T01:59:15.695Z to 2026-09-10T01:59:15.695Z Record version: sha256:b15db5c2779d6ba17751a25063deae27ac7f83084c7778d17ee31d6f08c8958d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-980-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/842/980/#45-other-presentation-matters) SEC content: no #### Treatment of Leases for Rate-Making Purposes ##### [842-980-45-1](https://asc.understandingaccounting.org/asc/842/980/#842-980-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:59:15.695Z to 2026-09-10T01:59:15.695Z Record version: sha256:6f21b43c0b43316636506a688bee0a5225781a535ea1fd8e117a376dbfba71f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 842 specifies criteria for classification of leases and the method of accounting for each type of lease. For rate-making purposes, a lease may be treated as an operating lease even though the lease would be classified as a finance lease under those criteria. In effect, the amount of the lease payment is included in [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") as rental expense in the period it covers. ##### [842-980-45-2](https://asc.understandingaccounting.org/asc/842/980/#842-980-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:59:15.695Z to 2026-09-10T01:59:15.695Z Record version: sha256:44e017aa28712332602480dabf6e90057c1a1fd07af81f8dac0c10e6277465f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For financial reporting purposes, the classification of the lease is not affected by the regulator's actions. The regulator cannot eliminate an obligation that was not imposed by the regulator (see paragraph [980-405-40-1](https://asc.understandingaccounting.org/asc/405/980/#405-980-40-1)). Also, by including the lease payments as allowable costs, the regulator sets rates that will provide revenue approximately equal to the combined amount of the right-of-use asset and interest on the lease liability over the term of the lease and, thus, provides reasonable assurance of the existence of an asset (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)). Accordingly, regulated entities shall classify leases in accordance with Topic 842. ##### [842-980-45-3](https://asc.understandingaccounting.org/asc/842/980/#842-980-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:59:15.695Z to 2026-09-10T01:59:15.695Z Record version: sha256:529e519bf3fbb2c44bfcb68949ddba29481f59ad2a798c74ee8ac422713b0db5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature of the expense elements related to a finance lease (amortization of the right-of-use asset and interest on the lease liability) is not changed by the regulator's action; however, the timing of expense recognition related to the lease would be modified to conform to the rate treatment. Thus, amortization of the right-of-use asset shall be modified so that the total of interest on the lease liability and amortization of the right-of-use asset shall equal the lease expense that was allowed for rate-making purposes. For newly completed plants such regulatory treatment could result in a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") as defined in Subtopic 980-340. ##### [842-980-45-4](https://asc.understandingaccounting.org/asc/842/980/#842-980-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:59:15.695Z to 2026-09-10T01:59:15.695Z Record version: sha256:2cb4eb835b228c76d1870e70fa5926e6bb3e6d7b129fbfb945cbf83507eea3fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [842-20-45-4](https://asc.understandingaccounting.org/asc/842/20/#842-20-45-4) states that an entity is not required to classify the interest expense and amortization of the right-of-use asset in a finance lease as separate items in an income statement. For example, the amounts of amortization of the right-of-use asset and interest on the related lease liability could each be combined with other costs and presented in a manner consistent with how the entity presents depreciation or amortization of similar assets and other interest expense. However, the disclosure of total interest cost incurred, required by Subtopic 835-20, shall include the interest on that lease liability, and the disclosure of the total amortization of the entity's right-of-use assets arising under a finance lease and interest on finance lease liabilities, required by Section 842-20-50, shall include amortization of that right-of-use asset and interest on that lease liability.