Close & reporting
Lease accounting (ASC 842 / IFRS 16)
Finbryn applies ASC 842 lease accounting for US businesses, building a lease inventory, calculating the right-of-use asset and lease liability, classifying each lease as operating or finance, and scheduling monthly amortization and interest so lease obligations show up on the balance sheet the way US GAAP requires.
Management report
Illustrative client · August 2026
USD
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
Why leases moved onto the balance sheet
Before ASC 842 took effect, most operating leases, such as office or retail space, stayed off the balance sheet entirely, showing up only as a rent expense. ASC 842 changed that for both public and private companies, requiring a right-of-use asset and a corresponding lease liability for nearly every lease running longer than twelve months, whether it is classified as an operating or a finance lease.
Building the lease inventory
The first step is gathering every lease agreement the business holds, which is often less complete than it should be, especially for equipment leases bundled into vendor contracts or embedded in a service agreement without being labeled as a lease at all. We review agreements to identify anything that meets the definition of a lease under the standard, not just what is filed under a lease heading.
Calculating the asset and liability
For each qualifying lease, we calculate the present value of the remaining lease payments using an appropriate discount rate, generally your incremental borrowing rate, to arrive at the initial lease liability and matching right-of-use asset. From there, a monthly schedule tracks the amortization of the asset and the interest expense on the liability through the remainder of the lease term, and we classify each lease as operating or finance based on the criteria in the standard, which changes how the expense flows through your income statement.
Practical exceptions that reduce the workload
Short-term leases, generally those running twelve months or less at inception with no option reasonably certain to be exercised, can often be excluded from the balance sheet treatment under a practical expedient, which we apply where it genuinely fits rather than by default.
Where this connects to other work
Lease accounting is usually one component of a broader US GAAP conversion, and the monthly amortization entries flow into the same prepaid schedules process used for other multi-period costs.
Questions
Frequently asked questions: Lease accounting (ASC 842 / IFRS 16)
Does ASC 842 apply to private companies or only public ones?
It applies to both. Private companies have generally had more time to adopt it, but the standard's requirements are the same regardless of company size.
What discount rate should we use if we don't know our incremental borrowing rate?
Where the actual rate is not known, we help estimate a reasonable rate based on your business's credit profile and document the basis, which is an accepted approach under the standard.
Do equipment leases need the same treatment as office leases?
Yes, as long as the arrangement meets the definition of a lease, regardless of the asset type, though the classification between operating and finance may differ.
What does lease accounting (ASC 842 / IFRS 16) actually include, month to month?
Lease accounting (ASC 842 / IFRS 16) covers lease inventory built from your existing lease agreements, along with right-of-use asset and lease liability calculated at an agreed discount rate. The work runs inside Google Sheets, Excel, NetSuite, Sage Intacct or QuickBooks Online, the file stays under your own subscription, and a senior principal reviews the output before it reaches you each period.
What access do you need to start lease accounting (ASC 842 / IFRS 16)?
View or edit access to Google Sheets, Excel, NetSuite, Sage Intacct or QuickBooks Online is enough to begin; nothing about your existing subscription or login changes on our side. Any additional access needed for a specific deliverable, such as a bank portal or receipt inbox, is agreed with you first, and the scope is set out in your engagement letter.
Do month-to-month leases need to be on the balance sheet?
Short-term leases can often be excluded under a practical expedient available in both standards; we confirm this lease by lease.
What discount rate do you use for the lease liability?
We use your incremental borrowing rate where it is known, or a reasonable estimate agreed with you where it is not, and document the basis in the schedule.
What if our records for lease accounting (ASC 842 / IFRS 16) are not up to date?
If your records are behind, we scope a catch-up first so lease accounting (ASC 842 / IFRS 16) starts from a clean, reconciled base. That catch-up is priced and timed separately from the ongoing engagement, so you always know what each part costs.
Who reviews the work before it reaches us?
Every deliverable under lease accounting (ASC 842 / IFRS 16) is reviewed by a senior principal before it reaches you. You keep access to the underlying file at every stage, so nothing about the work happens somewhere you cannot see it.
Related services
- Close & reportingUS GAAP conversionBooks moved from cash basis or another framework onto US GAAP accrual accounting, with every adjustment documented so a lender, investor or auditor can follow the trail.
- Close & reportingPrepaid schedulesInsurance, software subscriptions and other costs paid up front spread across the months they actually cover, instead of hitting one month's profit and loss all at once.
Industries
- Restaurants and multi-entity franchise groupsBookkeeping for restaurant groups and franchise operators running several locations or legal entities at once.
- Real estate and property managementBookkeeping for property owners and managers tracking income, expenses and reserves at the level of each individual property.
- HospitalityBookkeeping for hotels, short-term rentals and hospitality operators reconciling booking platform payouts and occupancy-driven revenue.
Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.