Accounting for Leases: Identifying a Lease

October 2021

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The FASB Master Glossary defines a lease as: “A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.”
What steps need to be taken in order to ensure you have accurately identified a lease? In the second article from our Accounting for Leases Under ASC 842 series, we take a closer look at how to properly evaluate whether a contract is or contains a lease.  

What’s inside:

  • Three criteria that determine a lease.
  • Key concepts to understand such as “period of time.”
  • Guidance on what is considered an identified asset.
  • Tips for determining the right to control use of an identified asset.
  • Restrictions and supplier protective rights.
  • Economic criterion of a lease under ASC 842.
  • Power criterion of a lease under ASC 842.
  • Example illustrations of lease identification.