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ASC 842 Short-Term Lease Exemption Check (12 Months or Less)

What is this money worth, or what does it cost, over time?

Whether a lease qualifies for the short-term lease election under ASC 842-20-25-2, and the straight-line expense if it does.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Result
Expense straight-line, no ROU asset or lease liability
Short-term lease election outcome
All results
MeasureResult
Meets the short-term lease definitionYes
Result
Expense straight-line, no ROU asset or lease liability
Straight-line lease expense per month$3,000
How this was worked out
Work shownrecomputed as you type
Short-term lease: lease term of 12 months or less and no purchase option reasonably certain to be exercised
Monthly expense = total payments / lease term in months

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Short-term lease: lease term of 12 months or less and no purchase option reasonably certain to be exercised
  • Monthly expense = total payments / lease term in months

How it works

ASC 842-20-25-2 lets a lessee elect, by class of underlying asset, not to recognize a right-of-use asset and lease liability for short-term leases. The lessee then recognizes the payments in profit or loss on a straight-line basis over the lease term and variable payments as incurred.

The term counts renewal periods the lessee is reasonably certain to exercise. A one-year lease with a renewal option the lessee is reasonably certain to take is not short-term. US GAAP has no low-value asset exemption; that exemption exists only in IFRS 16.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Is the election made lease by lease?

No. It is an accounting policy election by class of underlying asset.

What if the term later extends beyond 12 months?

Under ASC 842-20-25-3 a lease that changes so the remaining term extends more than 12 months from the end of the previously determined term, or the lessee becomes reasonably certain to exercise a purchase option, no longer qualifies and is accounted for under the full model from that date.

Is there a low-value exemption under ASC 842?

No. The low-value exemption is an IFRS 16 feature. Under US GAAP small leases are handled through materiality and capitalization policies.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

Related audit calculators

CalculatorASC 842 Lease Classification Test: Finance or Operating (Lessee)The five criteria in ASC 842-10-25-2 with the present value and lease term tests worked out, and the resulting classification.CalculatorIncremental Borrowing Rate Interpolation Calculator (ASC 842)Linear interpolation of a borrowing rate between two term points for the lease term, plus your security and credit adjustment.CalculatorROU Asset Impairment Calculator: Operating Lease Cost After ImpairmentImpairment of a right-of-use asset, straight-line amortization afterward and the first-year lease cost under ASC 842-20-35-10.
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