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Leveraged leases are those leases that meet the criteria in ASC 840-10-25-43(c). The guidance on leveraged leases has not been carried forward into the leasing standard. Instead, ASC 842-10-65-1(z) grandfathers the accounting for leveraged leases existing at its effective date. Accordingly, a lessor should continue to apply the guidance in ASC 840 to leveraged leases that commenced prior to the effective date of ASC 842. See LG 9 for information on effective date and transition.
Because ASC 842 does not allow a new lease to be accounted for as a leveraged lease, any new lease should be accounted for as either operating, sales-type, or direct financing leases, as required under ASC 842.

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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