What are the key principles of US GAAP lease accounting?

What are the key principles of US GAAP lease accounting?

US GAAP lease accounting primarily follows ASC 842, which requires lessees to recognize lease assets and liabilities on the balance sheet.

How does ASC 842 differ from the previous standard?

ASC 842 introduces a single model for lease accounting, eliminating the distinction between operating and finance leases for lessees.

What impact does this have on financial statements?

It increases transparency by showing lease obligations on the balance sheet, which can affect key financial ratios.

Are there any exceptions to this rule?

Yes, short-term leases and leases of low-value assets can be exempt from the balance sheet recognition requirement.

Can you explain how to calculate lease liabilities?

Lease liabilities are calculated as the present value of future lease payments, discounted at the rate implicit in the lease or the lessee's incremental borrowing rate.