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Presentation and disclosure

9.1 Chapter overview

The leases standard provides guidelines for presenting and disclosing lease arrangements. This
chapter provides an overview of those requirements for both lessees and lessors.

The objective of the disclosure requirements in the leases standard is to enable financial statement
users to understand the amount, timing, and uncertainty of cash flows arising from leases. To achieve
this objective, lessees and lessors are required to disclose qualitative and quantitative information
about their leases, the significant judgments made in applying the lease guidance, and the amounts
recognized in the financial statements related to those leases. Reporting entities should provide the
appropriate level of detail so that the information provided is meaningful to financial statement users.

9.2 Lessees

Although a lessee is required to present assets and liabilities for all leases in a similar manner,
presentation of expenses and cash flows will differ based on how a lease is classified.

9.2.1 Balance sheet presentation

As discussed in ASC 842-20-45-1, a lessee should separately present a right-of-use asset and lease
liability.

ASC 842-20-45-1
A lessee shall either present in the statement of financial position or disclose in the notes all of the
following:

a. Finance lease right-of-use assets and operating lease right-of-use assets separately from each
other and from other assets

b. Finance lease liabilities and operating lease liabilities separately from each other and from other
liabilities.

Right-of-use assets and lease liabilities shall be subject to the same considerations as other
nonfinancial assets and financial liabilities in classifying them as current and noncurrent in classified
statements of financial position.

9.2.1.1 Right-of-use asset

Financial statement users may view right-of-use assets differently than other assets; therefore, finance
lease and operating lease right-of-use assets should either be presented separately from each other and
other assets on the balance sheet or disclosed in the notes to the financial statements along with the
balance sheet line items in which those assets are included.

Although ASC 842-20-45-1 permits disclosure in the notes in lieu of separate presentation on the
balance sheet, ASC 842-20-45-3 prohibits combining finance lease and operating lease right-of-use
assets on the balance sheet.

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