- ASC 842 requires each separate lease to be classified at its commencement date, which is at the time that the lessee has the leased asset available for use.
- Once an entity has determined that it has a contract with a customer as defined in Accounting Standards Codification (ASC) 606, the entity must determine what the performance obligations are.
- ASC 606 (ASU 2014-09, Revenue from Contracts with Customers) Listen to Baker Tilly as we delve into the first element of revenue recognition: identifying the contract.
- The first step in applying ASC 842 is determining whether or not a contract, which is defined as an agreement between two parties which creates enforceable rights and obligations, contains a lease. Basically the contract contains a lease if it conveys the right to control the use of identified property or equipment for a period of time.
- The first step in applying Accounting Standards Codification (ASC) 606 is to identify the contract(s) with the customer.
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