What now governs lease accounting?

• A. ASC 842
• B. IFRS 16
• C. ASC 840
• D. GAAP

Answer: (C)

Lease accounting today is governed by ASC 842 for US GAAP (and IFRS 16 for IFRS). The older standard ASC 840 has been superseded. Under the current US GAAP framework, lessees recognize a right-of-use asset and a lease liability for most leases longer than 12 months, measured at the present value of lease payments. The income statement presentation depends on lease classification: operating leases typically show a straight-line lease expense, while finance leases separate interest on the lease liability from amortization of the right-of-use asset. Lessor accounting under ASC 842 largely retains existing categories but with its own rules.

So, the governing standard now is ASC 842 for US GAAP (and IFRS 16 for IFRS), not ASC 840.