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At a glance

Under the new leases standard, lessees will need to recognize virtually all of their leases on the balance sheet by recording a right-of-use asset and a lease liability.
This In depth includes our responses to frequently asked questions on the subsequent measurement of right-of-use assets in operating leases. Topics include: impairment testing, abandonment, subleases, lease components, and the treatment of right-of-use assets in acquisitions.

Note: This In depth was updated on June 14, 2019 and April 14, 2020 to add additional questions or expand on existing responses. All content that was added or updated since the original issuance date has been marked accordingly.
Under the new leases standard (ASC 842), lessees will initially record an ROU asset and a corresponding lease liability. The ROU asset represents the lessee’s right to use an asset legally owned by another party for a period of time. The ROU asset receives accounting recognition as an asset because a lessee has control over an economic resource and is benefiting from its use. The lease liability represents the obligation to make payments for that right of use.
Although subsequent measurement of the ROU asset is subject to the long-lived assets impairment guidance (ASC 360), there are a number of considerations that are not specifically addressed for operating leases in either the new leases standard or the long-lived assets impairment guidance.
This In depth addresses common questions related to various aspects of the ROU asset impairment test, as well as other questions related to transactions that may impact the accounting for ROU assets.
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