What is ASC 842?

What is ASC 842?

• A. The U.S. lease accounting standard that requires operating leases to be reported on the balance sheet while maintaining the distinction between finance and operating leases.
• B. A tax accounting standard.
• C. An internal corporate policy.
• D. A standard for environmental reporting.

Answer: (A)

ASC 842 is the US GAAP lease accounting standard that requires lessees to recognize assets and liabilities for leases on the balance sheet. Under this standard, operating leases are reported on the balance sheet with a right-of-use asset and a lease liability, and leases are classified as finance or operating, with distinct accounting treatments for each. This change moves operating leases onto the balance sheet, while preserving the distinction between financing and operating lease types for income statement presentation. It’s not a tax rule, an internal policy, or an environmental reporting standard.

ASC 842 is the US GAAP lease accounting standard that requires lessees to recognize assets and liabilities for leases on the balance sheet. Under this standard, operating leases are reported on the balance sheet with a right-of-use asset and a lease liability, and leases are classified as finance or operating, with distinct accounting treatments for each. This change moves operating leases onto the balance sheet, while preserving the distinction between financing and operating lease types for income statement presentation. It’s not a tax rule, an internal policy, or an environmental reporting standard.