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Scope

regarding the accounting for multiple units of account within a lease that are all deemed to be separate
lease components.

2.4.1 Identifying lease and nonlease components

Contracts may involve payments for lease components, nonlease components, and items that are not
considered contract components. The identification of these elements is important because
consideration in the contract (as defined in ASC 842) is allocated only to the lease and nonlease
components.

To be considered a component, an activity must transfer a good or service. The transfer of the right to
use an asset in a leasing arrangement is considered a component similar to the delivery of an asset or
providing services.

Lease components are elements of the arrangement that provide the customer with the right to use an
identified asset. The right to use an underlying asset is a separate lease component if (1) the lessee can
benefit from the right to use the underlying asset either on its own or together with other resources
that are readily available, and (2) the right to use the underlying asset is neither highly dependent on
nor highly interrelated with other rights to use other underlying assets in the arrangement.

Not all activities related to a lease are subject to the guidance in ASC 842. For example, a supplier may
lease a truck and also operate the leased asset on behalf of a customer (i.e., provide a driver). The
service of providing a driver is not related to securing the use of the truck and is not a lease
component. Only items that contribute to securing the output of the asset are lease components. In
this example, only the use of the truck is considered a lease component. Similarly, costs incurred by a
supplier to provide maintenance on an underlying asset, as well as the materials and supplies
consumed as a result of the use of the asset, are not lease components.

Nonlease components are distinct elements of a contract that are not related to securing the use of the
leased asset. Arrangements that include both lease and nonlease components are common in real
estate transactions. For example, if the landlord/lessor of a property provides common area
maintenance (CAM) of leased office space, such as cleaning and landscape services, the CAM involves
delivery of a separate service and is not considered a cost of securing the office building. As such, it is
considered a nonlease component.

Nonlease services can be included in equipment leases as well. For example, as part of a lease of
specialized equipment to a hospital, a medical device supplier may also provide operational or
maintenance services. Even if the equipment is considered a lease, the operational or maintenance
services are nonlease components presuming they are distinct (i.e., capable of generating an economic
benefit separate from the lease of the equipment). See RR 3.3 for additional information.

Excerpt from ASC 842-10-15-30
Components of a contract include only those items or activities that transfer a good or service to the
lessee. Consequently, the following are not components of a contract and do not receive an allocation
of the consideration in the contract:

a. Administrative tasks to set up a contract or initiate the lease that do not transfer a good or service
to the lessee

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