1. What is ASC 842? 2. ASC 842 effective dates 3. What is a lease under ASC 842? ASC 842 lease classifications and subtopics 4. Scope of ASC 842 5. ASC 842 lease accounting for lessees Operating lease accounting under ASC 842 and examples Finance lease accounting...
CONTENT BY
Rachel Reed holds both Bachelor's and Master's degrees in accounting from the University of Mississippi. She began her career in Accounting as an Assurance Intern at a multinational accounting firm, where she eventually progressed into a role as a Staff Accountant before joining FinQuery. With her background in financial services and accounting, she currently serves as a Technical Accounting Manager and Team Lead of Technical Accounting Consultants.
Sublease Accounting under ASC 842 Explained with an Example
1. What is a sublease? 2. How to account for a sublease under ASC 842 3. Example of sublease accounting under ASC 842 Operating lease amortization schedule for the initial lease 4. Summary 5. Ultimate Lease Accounting Guide 6. Related articlesWhat is a sublease? A...
FRS 102 vs. IFRS 16: Key Comparisons between the Lease Accounting Standards
The accounting treatment of leases has undergone significant changes in recent years, driven by a need for greater transparency and a more accurate representation of a company's financial position. Both FRS 102, the local standard used by most UK and Irish entities,...
Capital Lease Accounting and Finance Lease Accounting under ASC 842 Explained with a Full Example
1. What is a capital/finance lease? Finance lease vs. capital lease 2. Capital lease criteria under ASC 8403. Finance lease criteria under ASC 842 "Strong-form" vs. "weak-form" finance leases 4. Finance lease accounting example Determining finance lease vs. operating...
The Art of Shrinking: Lease Adjustments in Real Estate Downsizing
Working from home began as a two week “temporary” experiment in March 2020 at the start of the COVID 19 pandemic. Over four years later, remote work has evolved into the new normal as companies and employees realize they can operate as efficiently, if not more...
What Is an Embedded Lease? How to Determine If You Have a Lease within a Contract
1. What is an embedded lease? A contract contains a lease when the following two criteria are met: 2. How to identify embedded leases Requirement 1: A specified asset is identified Requirement 2: Control of the identified asset is transferred to the lessee 3. How the...
IFRS 16 vs. ASC 842 (US GAAP) Lease Accounting: What Are the Differences?
1. Transition approaches and application date 2. Scope 3. Lease classification for lessees 4. Variable payments based on an index or rate 5. Interest ratesThe international and United States lease accounting standards have been updated to provide further transparency...
Lease Payments: Establishing the Lease Liability/Asset & Receivable under GASB 87
1. Measurement Lessee's lease liability Lessor's lease receivable 2. Variable payments 3. Lease and nonlease components 4. Discount rate determination 5. Summary 6. Related articlesIn order to establish and maintain compliance with GASB 87, the new governmental lease...
Lease Modifications and Remeasurements under ASC 842
1. Lease modification types Modification of existing lease vs. new lease Modification to terminate all or part of the lease Modification vs. reassessment 2. Summary 3. Related articlesA lease modification is a change to the terms and conditions of a contract resulting...
Interest Rates under ASC 842 Explained: Implicit, Incremental Borrowing, Risk-Free
1. Interest rates under ASC 842 2. Implicit rate Application of the implicit rate 3. Incremental borrowing rate (IBR) Application of the incremental borrowing rate 4. Risk-free rate Expedient option Application of the risk-free-rate Proposed FASB amendment 5. Summary...
Leasehold Improvements Accounting and Amortization under US GAAP
1. Common examples 2. Accounting for leasehold improvements Amortization of leasehold improvements Example of leasehold improvement amortization 3. Leasehold improvements and AROs 4. Bonus depreciation and tax considerations for qualified LHIs Qualified improvement...
Rent Concession Accounting under ASC 842 during COVID-19: Full Explanation and Example
1. COVID-19 Background 2. Changes to lease payments under COVID-19 3. Accounting for COVID-19 lease concessions Deferral of payments Payment reductions Summary 4. Accounting for lease concessions within the modification framework 5. Related articlesCOVID-19 Background...
FRS 102 Section 20: A Step-by-Step Guide to Creating a Lease Inventory
In order to comply with the revised requirements for lease accounting under FRS 102, particularly those outlined in Section 20, you’ll need to conduct a thorough lease inventory. This will require you to gather, review, and consolidate your lease information. Though...
How to Replace Excel as Your Lease Accounting Solution in Four Steps
Accountants often recall the stress of meeting early deadlines when new lease accounting standards were introduced, at the mere mention of “ASC 842”, “GASB 87”, or “lease accounting,”. For many, that meant turning to Excel—a tool they knew and trusted. It seemed...
Cash vs. Accrual Accounting: What’s the Difference?
1. Cash basis accounting Advantages of the cash basis May be best for 2. Accrual basis accounting Advantages of the accrual basis May be best for 3. Cash vs. accrual accounting example 4. Summary 5. Related articlesChoosing and correctly applying the right accounting...
Capital/Finance Lease vs. Operating Lease Explained: Differences, Accounting, & More
1. What is an operating lease? 2. What is a capital lease / finance lease? 3. Capital/finance lease vs. operating lease criteria Transfer of title/ownership to the lessee Exercising a purchase option Lease term Present value Alternative use 4. Finance lease vs....
SaaS Management Overview: Platforms, Operations, Spend & More Explained
1. What is SaaS Spend Management? 2. What is SaaS Operations Management? 3. What is SaaS License Management? 4. SaaS vs. managed services 5. What are SaaS management platforms (SMPs)? Which SaaS applications are being used? How are they being used? Who has access to...
Tenant Improvement Allowance Accounting under ASC 842 Explained with a Full Example
1. What is a tenant improvement allowance? 2. How tenant improvement allowances were accounted for under ASC 840 3. How to account for tenant improvement allowances under ASC 842 4. Tenant improvement allowances paid at or before commencement of the lease 5. Tenant...
Sale-Leaseback Transactions and Accounting under ASC 842 Explained
1. What is a sale-leaseback transaction? 2. Why enter into a sale-leaseback transaction? What are the benefits of a sale-leaseback transaction? What are the disadvantages of a sale-leaseback transaction? 3. Examples of sale leasebacks 4. Identifying a sale-leaseback...
How to Conduct an Inventory of Your Leases under GASB 87
1. Scoping your leases 2. Definition of a lease 3. Exemptions Short-term leases Materiality Leases that transfer ownership Other GASB 87 exemptions 4. Finding your leases Look at your requisition process Engage the right departments Consolidate your leases in one...
Asset Retirement Obligation (ARO) Accounting Example for Real Estate
An asset retirement obligation (ARO) represents the legal commitment to remove certain improvements or modifications to an asset at the end of the asset’s use. The FASB’s ASC 410 Asset Retirement and Environmental Obligations (ASC 410) discusses accounting for AROs....
GASB 87 Disclosure Requirements for Lessees Explained with Examples
1. Qualitative disclosures 2. Quantitative disclosures Lease asset disclosure Lessee’s outflow of resources Lease liability disclosure and maturity analysis Future lease commitments Short-term leases: exempt Additional disclosures (if applicable) 3. Summary 4. Related...
Interest Rate Implicit in the Lease under IFRS 16 Explained
1. What is the implicit interest rate under IFRS 16? Implicit rate: ASC 842 vs. IFRS 16 2. Example: Calculate the interest rate implicit in a lease under IFRS 16 3. Summary 4. Related articlesWhat is the implicit interest rate under IFRS 16? The rate implicit in the...
Lease Liability Amortization Schedule: How to Calculate It in Excel
1. What is lease liability? 2. How to create the lease amortization schedule and calculate your lease liability Create five-column spreadsheet Enter the number of periods and cash payments Enter expense formula Fill expense column Enter liability reduction formula...
How to Replace Your Lease Accounting Solution in Five Steps
Organizations initially focused on lease accounting standards compliance may have overlooked critical software features. Now, with increased expertise and advanced solutions, they recognize the need for improvement. If you’ve seen any of the signs it’s time to break...
Materiality, Immateriality, and Material Misstatements in Accounting
1. What is materiality in accounting? 2. What does it mean if something is immaterial in accounting? 3. What is a material misstatement? 4. How does materiality relate to leases, subscriptions, and fixed assets? 5. Related articlesWhat is materiality in accounting?...
Accrued Expenses Guide: Accounting, Examples, Journal Entries, and More Explained
What are accrued expenses? Accrued expenses, or accrued liabilities as they are commonly referred to in general accounting, are recognized on the balance sheet as a liability. This is because an “accrued liability” is the result of an accrued expense, which represents...
Deferred Rent under ASC 842 Explained with Examples and Journal Entries
1. What is deferred rent? 2. Deferred rent under ASC 842 3. Deferred rent example under ASC 842 with ROU assets and lease liabilities Deferred rent journal entries under ASC 842 for year 1 Deferred rent under ASC 840 vs. ASC 842 4. Treatment of deferred rent during...
CapEx vs. OpEx: Capital and Operating Expenses Explained
1. CapEx (Capital Expenditures) How is CapEx reported? 2. OpEx (Operating Expenses) How is OpEx reported? 3. Is software CapEx or OpEx? 4. CapEx vs OpEx: Which is better? 5. Summary 6. Related articlesEvery company has a variety of costs, from office leases to...
How to Calculate the Present Value (PV) of Future Lease Payments in Excel
1. Present value of lease payments explained PV (Present Value) vs. NPV (Net Present Value) Minimum lease payments and future lease payments 2. How to calculate the present value of a payment stream using Excel in 5 steps Step 1: Create your table with headers Step 2:...
SFFAS 54: FASAB Lease Accounting Explained with a Full Example
1. What is SFFAS 54? 2. Effective date 3. Lease definition What is a lease? Embedded leases 4. Scope Short-term lease exemption Lessee recognition Lessor recognition Discount rate 5. Example 6. SummaryWhat is SFFAS 54? SFFAS 54 is the new lease accounting standard...
How to Conduct an Inventory of Your Leases
1. Scoping your leases Leases defined Exemptions 2. Finding your leases Look at your requisition process Engage the right departments 3. Consolidate your leases in one place Cross-check your template for accuracy and completeness 4. Summary 5. Related articlesThere’s...
Lease and Non-Lease Components under ASC 842: Electing the Practical Expedient
1. Identifying components Lease, nonlease, and noncomponents 2. Implications of the expedient Implications of not electing the expedient Implications of electing the expedient 3. Summary 4. Related articlesTo offer relief for the significant effort levels the...
Financial Statement Audits for Leases: Testing
1. Completeness and existence 2. Documentation of policies 3. Accuracy of calculations 4. Presentation 5. Summary 6. Related articlesThis is the third segment of an article targeted at private companies who have not yet adopted the lease accounting standard, as well...
Accounting for Rent Concessions under IFRS 16 as a Result of the COVID-19 Pandemic
1. Background 2. Changes to lease payments under COVID-19 3. IASB response 4. Accounting for COVID-19 lease concessions example 5. Accounting for lease concessions within the modification framework 6. Summary 7. Related articlesBackground The coronavirus pandemic...