What is ASC 842?
The lease accounting standard that moved operating leases onto the balance sheet.
ASC 842: definition
Before ASC 842, operating leases lived in the footnotes - off balance sheet. Now, for leases longer than 12 months, you recognize a right-of-use asset (your right to use the item) and a lease liability (your obligation to pay), then amortize both over the lease term. It affects any business with office space, vehicles, or equipment leases.
- Applies to lessees with leases over 12 months
- Records a right-of-use (ROU) asset and a lease liability at commencement
- Distinguishes finance leases from operating leases in expense pattern
- Requires ongoing remeasurement for modifications and index changes
How Fintra handles it
Fintra tracks leases as scheduled obligations: it computes the present value of the payments, records the ROU asset and lease liability, and posts the periodic amortization and interest entries. Payments reconcile against the liability, and the close verifies the balances - so lease accounting is part of the ledger, not a separate schedule someone forgets to update.
Worked example
Frequently asked questions
What changed under ASC 842?
The biggest change is that operating leases now appear on the balance sheet as a right-of-use asset and lease liability, where they were previously disclosed only in footnotes. This increased reported assets and liabilities for many companies without changing cash flow.
What is a right-of-use asset?
The ROU asset represents your right to use a leased item over the lease term. It is recorded at commencement alongside the lease liability and amortized over the term. Fintra builds the schedule and posts the entries.
Does ASC 842 apply to short-term leases?
Leases of 12 months or less can use a practical expedient and be expensed straight-line without recording an ROU asset and liability. Longer leases must be capitalized. Fintra applies the threshold consistently to your lease portfolio.
How does Fintra handle lease amortization?
Fintra computes the present value of lease payments, records the ROU asset and liability, and posts monthly amortization and interest automatically, reconciling payments against the liability so the balance always ties out at close.
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