ASC 842 Compliance Checklist - 2025

ASC 842 is the new lease accounting standard introduced by the Financial Accounting Standards Board (FASB), which requires companies to recognize almost all leases on their balance sheets as a right-of-use (ROU) asset and a lease liability. The goal of ASC 842 is to increase transparency and comparability in financial reporting related to lease obligations.

A contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This includes not only explicit leases but also embedded leases within service agreements.

You'll need information on the lease term, lease payments (fixed, variable, purchase options), commencement dates, renewal or termination options, and any other relevant contractual terms.

After implementation, it's crucial to continuously monitor lease terms, update lease data for changes, and maintain accurate records. Regularly review the new lease accounting policies to ensure ongoing compliance with ASC 842 requirements and prepare for future audits.

ASC 842 came into effect for public companies starting after December 15, 2018, and for private companies and nonprofits beginning after December 15, 2021. Timely compliance is essential for regulatory adherence, financial transparency, and effective lease management.