Wiley GAAP 2015: Interpretation and Application of Generally Accepted Accounting Principles 2015

Chapter 53ASC 840 LEASES

PERSPECTIVE AND ISSUES

   Subtopics

   Scope and Scope Exceptions

   Overview

DEFINITIONS OF TERMS

CONCEPTS, RULES, AND EXAMPLES

   Variable Interest Entities

   Inputs

   Processes

   Outputs

   Analysis under ASC 810

   Lease or Sale—The Interplay of Lease and Revenue Recognition Accounting

   Lessee Classification

   Lessor Classification

   Lessee Accounting

   Lessor Accounting

   Real Estate Leases

   Leases involving only land.

   Sale-Leaseback Transactions

PERSPECTIVE AND ISSUES

Subtopics

ASC 840, Leases, and its subtopics establish standards of accounting and reporting by lessees and lessors for leases overall, and for specific classifications of leases. ASC 840 contains four subtopics:

• ASC 840-10, Overall,
• ASC 840-20, Operating Leases
• ASC 840-30, Capital Leases
• ASC 840-40, Sale-Leaseback Transactions.

Each of the subtopics contains the following Subsections:

• General
• Lessees
• Lessors.

Scope and Scope Exceptions

ASC 840 applies to all entities. However, to be considered a lease the right to use property, plant, or equipment must be transferred from one contracting party to the other. The definition of lease does not include contracts for services.

Overview

Lease transactions became enormously popular over the years as businesses sought new ways to finance long-lived assets. Leasing offered two attractive advantages: typically 100% financing, coupled very often with off-the-books obligations.

There are several economic reasons why the ...