Audit Risk Alert by AICPA;

Author:AICPA; [AICPA]
Language: eng
Format: epub
ISBN: 9781948306911
Publisher: John Wiley & Sons, Incorporated
Published: 2020-01-20T00:00:00+00:00

.159 The identification of a lease under FASB ASC 842 should be based on the presence of key elements in the definition; that is, (a) the contract must depend on the use of an identified asset; (b) the customer has to have the right to substantially all of the economic benefits from use of the asset; and (c) the customer has to have the right to direct the use of the asset.

Separating Components of a Lease Contract

.160 Under FASB ASC 842, a contract that contains a lease should be separated into lease and nonlease components. Separation should be based on the right to use; each underlying asset should be considered to be separate from other lease components when both of the following criteria are met:

•

The lessee can benefit from the right of use of the asset (either alone or with other readily available resources).

•

The right of use is neither highly dependent on nor highly interrelated with other underlying assets in the contract.

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