finance lease

Broad Transactions2

1. 840-30Capital Leases840 Leases

   ASC 840-30 was the legacy guidance governing lessee accounting for capital leases and lessor accounting for direct financing and sales-type leases (recognition, initial measurement of the leased asset and obligation at the present value of minimum lease payments, subsequent interest and amortization, terminations/renewals, presentation, and disclosure). Every paragraph in this subtopic has been superseded — almost entirely by ASU 2016-02 (Leases, which created ASC 842), with 840-30-25-5 superseded by ASU 2014-09 (Revenue). As a result, 840-30 contains no operative guidance for entities that have adopted ASC 842.

2. 842-20Lessee842 Leases

   ASC 842-20 governs how a lessee accounts for leases already classified as finance or operating leases under 842-10. At commencement the lessee recognizes a right-of-use asset and lease liability measured at the present value of unpaid lease payments (842-20-25-1; 30-1); thereafter finance leases produce separate amortization and interest (842-20-25-5), while operating leases produce a single straight-line lease cost (842-20-25-6). It also covers short-term lease policy elections, remeasurement, ROU asset impairment, leasehold improvements, subleases, terminations, and extensive presentation and disclosure requirements.