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Hot Topic: Leases

Hot Topic | January 2023

ASC 842 transition complexities from recent economic conditions

This Hot Topic compiles questions on select ASC 842 implementation issues from the KPMG Leases handbook into one concise document to assist entities in their initial application of ASC 842.


Entities that have not yet adopted or issued financial statements under ASC 842 (leases)

Relevant dates

Effective datePublic entities and certain other entities*Public NFPs**All other entities

Annual periods – Fiscal years beginning after

Fully Adopted

Fully Adopted

Dec 15, 2021

Interim periods – In fiscal years beginning after

Fully Adopted

Fully Adopted

Dec 15, 2022

Early adoption allowed in fiscal years beginning afterN/AN/AYes

* Includes (1) public business entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market (‘Public NFPs’); and (3) employee benefit plans that file financial statements with the SEC.

** That had not issued GAAP-compliant financial statements reflecting the adoption of ASC 842 before June 3, 2020.

Key impacts

During public companies’ adoption of ASC 842 in 2019 we observed companies experience challenges with:

  • applying ASC 360 (property, plant and equipment) impairment and abandonment requirements to previously unrecognized operating lease right-of-use (ROU) assets; and
  • understanding how ASC 420 (exit and disposal costs), which previously applied to operating leases under the legacy leases guidance (ASC 840), applies to those leases under and in transition to ASC 842.

Due to economic events and conditions of the last few years, these issues may be even more acute for private entities adopting and reporting under ASC 842 for the first time.

This Hot Topic compiles specific questions on these topics from the Leases handbook into one concise document to assist entities in their initial application of ASC 842.

Download the document:

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Scott Muir
Partner, Dept. of Professional Practice, KPMG US
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Corey Glidden
Senior Manager, Dept. of Professional Practice, KPMG US

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