Differences Between ASC 840 and ASC 842: Residual Value Guarantees



George Azih:

Another difference is residual value guarantees. Under current GAAP, under 840 if there’s a residual value guarantee, you would include the entire guarantee, the entire amount in your calculation of the present value of your minimum lease payments. You would include the entire guarantee. Under the new lease accounting rules all you include is the amount of the guarantee that you’d expect to pay. See, it’s a judgment call. So you are using the amount you expect to pay onto the residual value guarantee as opposed to the entire thing.