Common U.S. GAAP Issues Facing Accountants, 2nd Edition

Chapter 5The New Leasing Model

Learning objectives

• Determine whether an arrangement contains a lease under FASB ASC 842.
• Identify considerations with respect to substitution rights.
• Differentiate between various decision-making rights.

Chapter overview

This chapter only provides an overview of the new lease accounting standard and specifically how it relates to the determination of whether an arrangement contains a lease. This includes a discussion of topics such as whether there is an identified asset, whether control is obtained over that asset, as well as the consideration of substitution rights and other topics such as decision-making rights. This chapter concludes with several examples that illustrate the application of the new lease accounting standard for determining whether a contract contains a lease.

Application

Scope

The standard applies to all entities: public, private, and not for-profit, whether large or small.

It applies to all leases, including subleases, other than the following:

• Leases of intangible assets
• Leases to explore for or use minerals, oil, natural gas, and similar nonregenerative resources
• Leases of biological assets, including timber
• Leases of inventory
• Leases of assets under construction

Effective dates

The new leasing standard is effective as follows:

• Public business entities (which would include a not-for-profit entity that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an ...