Our whitepaper on lessor accounting under ASC 842explains contracts within the scope of Topic 842, Leases, of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), as well as a lessor’s accounting under ASC 842 for its contracts that are (or include) leases. The most significant changes under ASC 842 is for lessees who are now required to recognize right-of-use (ROU) assets and lease liabilities for most leases (see A guide to lessee accounting under ASC 842). The impact on lessors is not expected to be as significant.
The whitepaper to lessor accounting includes guidance and examples to:
Determine whether a contract is within the scope of ASC 842
Determine whether a contract is or includes a lease that meets the definition of a lease in ASC 842
Determine the unit(s) of account in the contract if a contract is or includes one or more leases (which involves identifying the lease and non-lease components in the contract, as well as non-components (e.g., taxes, insurance)), and determine whether the lease and non-lease components should be treated as separate units of account
Identify or determine the key inputs needed to classify and account for a lease under ASC 842
Determine the lease’s classification under ASC 842
Apply the appropriate accounting model in ASC 842 to the lease (which depends on its classification)
Present and disclose the lease in the financial statements in accordance with ASC 842
The whitepaper also discusses the effective date and transition requirements in ASC 842 and differences between how lessors account for leases under ASC 842 and International Financial Reporting Standard (IFRS) 16, Leases.
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