November 13, 2024
ASC stands for Accounting Standards Codification. The posts included in this category expound on this, but are all about ASC 842. This represents the standard as issued by the Financial Accounting Standards Board, better known as FASB. ASC 842 is basically the rule of thumb that governs lease management and accounting. This standard evolved as a result of the Enron fallout.Â
ASC 842 represents a considerable change from the previous lease accounting standard, ASC 840. Its goal is to improve upon transparency and comparability when it comes to presenting financial statements from leasing companies or companies that also lease properties. A key difference between ASC 842 and 840 is that lessees must now recognize a right of use asset and lease liability for nearly all leases. This is a big proponent when it comes to allowing for more transparency.Â
ASC 842 also rules over lease classifications, lease terms and payments, disclosure requirements, transition provisions and effective dates of a lease agreement. ASC 842 now calls for companies to report on ROU (right-of-use) assets and lease liabilities as well as interest and amortization expenses and cash flow statements.Â
In summary, ASC 842 requires all leases that are longer than 12 months to be reflected on a company’s balance sheet. These posts will help you to answer any questions about this current standard while also providing helpful insight as to the most user-friendly ASC 842 software available to you.