ASC 842
ASC 842 is the lease accounting standard issued by the Financial Accounting Standards Board (FASB) in the United States. It replaced the older ASC 840 standard and requires most leases to be reported as assets and liabilities, increasing transparency in financial reporting.
Under ASC 842, lessees must show a right-of-use (ROU) asset and a matching lease liability for leases longer than 12 months. This applies to both finance and operating leases and affects organisations that follow US Generally Accepted Accounting Principles (GAAP).
Key points
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All significant leases must appear on the balance sheet
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ROU assets represent the right to use the leased item
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Lease liabilities reflect future payment obligations
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Short-term leases under 12 months are exempt
Why ASC 842 matters
Before ASC 842, many leases, especially operating ones, were kept off the balance sheet. This made it harder for stakeholders to understand a business's financial position. The new standard:
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Improves financial transparency
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Helps with better lease vs buy decisions
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Supports consistent reporting across sectors
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Encourages tighter internal controls
Challenges and compliance
Implementing ASC 842 can be complex. It requires:
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Careful data gathering across sites
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Accurate lease calculations
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System integration with finance and asset platforms
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Ongoing monitoring of lease changes and renewals
How technology helps
Platforms like Concerto's IWMS simplify ASC 842 compliance by:
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Automating lease tracking and calculations
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Managing lease modifications and remeasurements
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Providing audit-ready reports
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Supporting global, multi-site lease portfolios
For UK organisations with operations or reporting obligations in the US, ASC 842 may apply alongside IFRS 16. Software support is key to staying compliant and reducing manual workload.
