Differences Between ASC 840 and ASC 842: When is Classification Determined?



George Azih:

When is classification determined? Under current GAAP, you determine classification upon lease execution. When you actually sign the lease, you perform the task to determine, okay, is this a capital lease or is this an operating lease?

Under 840, this task cut up half of that lease’s commencement. And the commencement date is the possession date, ladies and gentleman.

So, that’s a subtle difference.