United States

ASC 842: An overview and a guide to lessee accounting


We have published the following focused on Topic 842, Leases, of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC):

  • Leases: Overview of ASC 842. Our overview provides a high-level summary of certain guidance in ASC 842 applicable to lessees and (or) lessors, including guidance related to the definition of a lease, identifying the units of account present in a contract that includes or is a lease, classifying a lease, identifying the appropriate discount rates to use in the classification and accounting for a lease, recognizing initial direct costs related to a lease and the overall accounting for a lease. Our overview also discusses the effective date of ASC 842 and the transition methods available under ASC 842.
  • A guide to lessee accounting under ASC 842. Our lessee guide includes in-depth discussion and numerous detailed examples on all facets of a lessee’s accounting for its leases, from determining whether a contract is in the scope of ASC 842 to initially and subsequently accounting for leases to presenting and disclosing leases in the financial statements. Our lessee guide also includes comprehensive discussion of the transition guidance in ASC 842, as well as examples illustrating application of that guidance. The appendices to our lessee guide include an easy-to-use table that summarizes the reassessment and remeasurement events applicable to lessees and a lessee disclosure checklist.  

Even though the FASB provided significantly deferred effective dates for ASC 842, the effective date for public business entities and certain not-for-profit entities and employee benefit plans with calendar year ends (with limited exceptions) has already passed—January 1, 2019. While the FASB recently issued a proposed Accounting Standards Update that would defer the effective date for a private company with a calendar year end from its annual financial statements for December 31, 2020 to its annual financial statements for December 31, 2021, there is no longer time to delay implementation of ASC 842 given the complexities involved. Use our overview and guide to help with this implementation process.