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LEARNING RESOURCES

The Bottom Line on the New Lease Accounting
the lease payments ($1,000,000) to obtain the Requirements
reduction in the principal amount of the lease
Learn the core principles of FASB ASC 842, Leases,
obligation ($1,000,000 – $702,446 = $297,554).
including identification, recognition, measurement,
The lease liability at the end of year 1 is equal to
presentation, and disclosure requirements.
the lease obligation at the beginning of the period
minus the principal reduction, or $14,048,925 CPE SELF-STUDY
– $297,554 = $13,751,371. The adjustment of
$465,304 to the right-of-use asset represents
the difference between the cash payment and Leases: Mastering the New FASB Requirements
the single lease cost ($1,000,000 – $1,167,750 This course offers hands-on learning with journal
= ($167,750)) plus a decrease of $297,554, entry examples that demonstrate how to apply the
consistent with the change in the lease liability. new standard.
Calculation of the deferred tax asset is the same
CPE SELF-STUDY
as under Topic 840, or $1,160,250 – $1,000,000 =
$160,250 × 0.21 = $33,653, necessitating the same
For more information or to make a purchase, go to aicpa.org/cpe-learning
journal entry.
or call the Institute at 888-777-7077.
At the end of year 15, the lessee would make
the entry shown in the chart “Accounting for End
of Year 15,” under the new guidance (see the table
“Expense and Amortization Schedule”).
The adjustment to the right-of-use asset rep- AICPA RESOURCES
resents the difference between the cash payment
and single lease cost ($1,210,000 – $1,167,750 = Articles
$42,250) and a decrease of $877,975, consistent
“Accounting for Sale and Leaseback Transactions,” JofA, July
with the change in the lease liability.
1, 2020
CONCLUDING COMMENTS “Lease Accounting Standard Requires New Auditor Judgments,”
Although public entities transitioned to Topic JofA, March 1, 2020
842 in 2019, their managers continue to grapple
“Lease Accounting: A Private Company Perspective,” JofA, July
with implementing many of its complex provi-
1, 2019
sions. Many of these entities continue to struggle
with developing information systems designed Online resource
to capture and track changes to thousands of
Exploring ASC 842: Leases Standard
lease transactions. Nonpublic entities, despite
the availability of several practical expedients, are Reports
expected to be challenged as well. For these enti-
ASC 842: Unanticipated Costs and Complexities in Adoption
ties, the new lease guidance becomes effective for
fiscal years beginning after Dec. 15, 2021, and for CPEA ACS 842 Implementation Series, Parts I–IV
interim periods within fiscal years beginning after
CPEA ACS 842 Implementation Series, Part VI
Dec. 15, 2022, although they have been afforded
more time to transition and implement the new FASB ASC 842: Lease/Non-Lease Component Practical Expedient —
guidance. Balancing Financial Reporting Consequences
It is important to note that the changes to
reporting areas discussed in this article relate
solely to operating leases. Because deferred rent is
no longer recognized as a liability, the change in
reporting does not affect transactions classified as with the difference between the lease payments
financing leases. and fixed expense without regard to the initial
Moreover, while deferred rent is not explic- direct costs. Again, Topic 842 requires initial
itly recognized under Topic 842, it is implicitly direct costs paid at the inception of the lease to be
recognized in the amortization of the right-of-use added to the right-of-use asset. Under Topic 840,
asset under Topic 842 because it represents the these costs included the cost associated with many
portion of the straight-line expense associated activities including some overhead. In contrast,

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