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Perspectives

Lease disclosure under ASC 842

Common pitfalls to avoid

Lease disclosures under the new standard (ASC 842) are intended to give financial statement users a better understanding of an entity’s leasing activities, helping them “assess the amount, timing, and uncertainty of cash flows arising from leases.” Learn more about some common pitfalls and ways to get disclosure right.

Learning from revenue recognition

ASC 842 contains new and expanded lease disclosure requirements that are significantly more comprehensive and complex than before. When adopting the new revenue recognition standard, many companies didn’t consider disclosures until late in the implementation process. For many, their main focus was on implementing complete and accurate accounting models for recognition and measurement, which left them scrambling at the deadline to meet the lease disclosure requirements.

As with revenue recognition, qualitative disclosures under the new lease accounting standard are extensive and require technical analysis and a deep understanding of quantitative models. To avoid last-minute fire drills, companies should make an active effort to understand the disclosure requirements early in the implementation process—ideally prior to selecting a technology vendor and platform. This early effort might even include drafting qualitative disclosures to gain a firsthand understanding of the requirements and challenges.

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Understanding requirements and challenges

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

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