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Presentation and disclosure

the lessee’s ongoing short-term lease commitments, a lessee should disclose that fact and the amount
of its short-term lease commitments.

EXAMPLE 9-1

Short-term lease expense for the period does not reasonably reflect on-going short-term lease
commitments

Lessee Corp elects to apply the short-term lease measurement and recognition exemption to its office
equipment. For the majority of the reporting period ending 12/31/X8, there were only two short-term
leases in that class. However, on 12/27/X8, Lessee Corp enters into 20 new lease agreements for office
equipment and they all qualify for the short-term lease measurement and recognition exemption. The
short-term lease expense for the reporting period ending 12/31/X8 was $300,000, but the total short-
term lease payments for the following year will be $3,000,000.

Is Lessee Corp required to disclose the fact that the short-term lease payments will change in the
following year?

Analysis

Yes, Lessee Corp must disclose the $3,000,000 commitment because the $300,000 of short-term
lease expense recorded in the current period does not reasonably reflect its on-going short-term lease
commitments.

9.2.5 Quantitative disclosure

The leases standard also requires a lessee to disclose certain quantitative items as discussed in ASC
842-20-50-4.

ASC 842-20-50-4
For each period presented in the financial statements, a lessee shall disclose the following amounts
relating to a lessee’s total lease cost, which includes both amounts recognized in profit or loss during
the period and any amounts capitalized as part of the cost of another asset in accordance with other
Topics, and the cash flows arising from lease transactions:

a. Finance lease cost, segregated between the amortization of the right-of-use assets and interest on
the lease liabilities.

b. Operating lease cost determined in accordance with paragraphs 842-20-25-6(a) and 842-20-25-7.

c. Short-term lease cost, excluding expenses relating to leases with a lease term of one month or less,
determined in accordance with paragraph 842-20-25-2.

d. Variable lease cost determined in accordance with paragraphs 842-20-25-5(b) and 842-20-25-
6(b).

e. Sublease income, disclosed on a gross basis, separate from the finance or operating lease expense.

9-6