Accounting for Leases: Identifying a Lease
October 2021
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.