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Lease disclosures under the new standard (ASC 842) are intended to give financial statement users a better understanding of an entity's leasing activities, helping them assess the amount, timing, and uncertainty of cash flows arising from leases. Learn more about some common pitfalls and ways to get disclosure right.

ASC 840 to ASC 842 transition date While calendar-year private companies were initially required to adopt by January 1, 2020, the FASB amended this last summer after many companies felt unprepared for the transition. Now, calendar-year private companies are required to transition to ASC 842 by January 1, 2022.

Noncash expenses are those expenses that are recorded in the income statement but do not involve an actual cash transaction. A common example of noncash expense is depreciation. When the amount of depreciation is debited in the income statement, the amount of net profit is lowered yet there is no cash flow.

A lessee should present, either on the balance sheet or in the notes to the financial statements, all of the following: Finance and operating lease right-of-use assets, separately from each other and from other assets. Finance and operating lease liabilities, separate from each other and from other liabilities.

Overview. ASC 840 is the previous lease accounting standard governing companies that file under US Generally Accepted Accounting Principles (US GAAP). ASC 842 replaced ASC 840 for public companies starting on January 1, 2019. Private companies will follow starting January 1, 2020.

Under ASC 840, land is separately classified when the fair value of the land is 25% or more of the combined fair value of the land and building. Under ASC 842, the determination of whether or not a contract is a lease or contains a lease is done at the inception date.

Under ASC 840, land is separately classified when the fair value of the land is 25% or more of the combined fair value of the land and building. Under ASC 842, the determination of whether or not a contract is a lease or contains a lease is done at the inception date.