Wiley GAAP 2019

56ASC 840 LEASES¹

PERSPECTIVE AND ISSUES

Technical Alert

See the chapter on ASC 842 for information on the new standard on leases.

Subtopics

ASC 840, Leases, and its subtopics establish standards of accounting and reporting by lessees and lessors for leases overall, and for specific classifications of leases. ASC 840 contains four subtopics:

• ASC 840-10, Overall
• ASC 840-20, Operating Leases
• ASC 840-30, Capital Leases
• ASC 840-40, Sale-Leaseback Transactions

Each of the subtopics contains the following subsections:

• General
• Lessees
• Lessors

Scope and Scope Exceptions

ASC 840 applies to all entities. However, to be considered a lease the right to use property, plant, or equipment must be transferred from one contracting party to the other. The definition of lease does not include contracts for services.

DEFINITIONS OF TERMS

Source: 840 Glossary Sections. Other terms relevant to this topic can be found in Appendix A, Definitions of Terms: Acquiree, Acquirer, Acquisition by a Not-for-Profit Entity, Contract, Customer, Financing Receivable, Nonprofit Entity, Revenue, Standalone Selling Price, Variable Interest, and Variable Interest Entity.

Bargain Purchase Option. A provision allowing the lessee, at his option, to renew the lease for a rental sufficiently lower than the fair rental of the property at the date the option becomes exercisable that exercise of the option appears, at lease inception, to be reasonably assured. Fair rental of a property in this context shall mean ...