Lessee discount rates under ASC 842
Hot Topic | November 2021
Key considerations for public and private entity lessees when determining the discount rates for leases.
Determining an appropriate lessee discount rate under ASC 842 will frequently be neither a straightforwarded exercise nor the same as under ASC 840, particularly for private entities.
Relevant dates
Key impacts
- Provides guidance about how a lessee determines the discount rate for a lease under ASC 842
- Discusses how ASU 2021-09 changes the private entity lessee risk-free discount rate practical expedient
- Reminders and examples about how to determine the lessee’s incremental borrowing rate
Report contents
- Key impacts
- Rate implicit in the lease
- Risk-free discount rate practical expedient (private entities only)
- Incremental borrowing rate
- Examples
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Leases - Enhanced focus on lessee discount rates
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Resource
FASB amends risk-free discount rate expedient
Private entity practical expedient electable by class of underlying asset; interplay with implicit rate clarified.
Resource
Handbook: Leases
Latest edition: Our in-depth guide to ASC 842 – with Q&As, interpretive guidance and examples.
Leases: Hot Topics
These focused Hot Topics are intended for those with an interest in the detailed application of ASC 842.