The new Financial Accounting and Standards Board (FASB) lease accounting standard, ASC 842, requires companies to capture and report on their leased assets. As a result, this improves transparency regarding company leasing obligations.

But how are leases properly accounted for within ASC 842 journal entries? ASC 842 contains many major nuances your company needs to adapt to.

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How does ASC 842 effect journal entries?

Due to the new standards, all leased assets (except short-term leases, 12 months or less) are required to be recorded on the balance sheet as an asset and liability.

To determine the proper lease accounting treatment within the journal entries, leases must be classified as an operating lease or a finance (formerly capital) lease.

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Operating Leases:

A lease that provides lessee with control over use of underlying asset without ownership

ASC 840

  • Unrecorded obligations

ASC 842

  • Recorded on balance sheet as ROU asset and lease liability
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Finance Leases:

A lease that is effectively a purchase agreement

ASC 840

  • Recorded on balance sheet as Capital Lease Asset and Capital Lease Liability
  • Residual Value Guarantee included in minimum lease payments
  • Probable amount owed not considered

ASC 842

  • Recorded on balance sheet as ROU Asset and Lease Liability
  • Residual Value Guarantee only used in lease type test
  • Probable amount owed used in minimum lease payments

Visual Lease automates ASC 842 journal entries.

Our robust lease accounting software collects the information you need to make lease accounting journal entries easier.

Collect data

Visual Lease is configurable to capture and track journal entry sub types required for financial and operating reporting, including FASB/IFRS calculations. Examples of journal entry sub types available for output within the Visual Lease platform include, but are not limited to:

  • Accumulated Depreciation
  • Accrued Rent
  • Amortization Expense
  • AP/Cash
  • ASC 420 Exit or Disposal Cost Obligations
  • Asset Value – Gross
  • Clearing Account
  • Deferred Rent
  • Gain and Loss on Remeasurement
  • Indirect costs
  • Interest Expense
  • Lease Expense
  • Lease Incentives
  • Lease Liability
  • Prepaid Rent
  • Retained Earnings
  • ROU Asset

Report and export data

Users can easily report and export reports on data from within Visual Lease’s platform by:

  • FASB Journal Entry Summary Report: Captures journal entries resulting from calculations made in the FASB/IASB module across your lease portfolio. You can view the journal entries for a single lease or across multiple records.
  • Output to GL Feeds: Accounting feeds for GL entries can be configured to output journal entries required for reporting as well as other values from FASB/IFRS calculations.