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On the lease commencement date, a lessee is required to measure and record a lease liability equal to the present value of the remaining lease payments, discounted using the rate implicit in the lease (or if that rate cannot be readily determined, the lessee's incremental borrowing rate).

ASC 842 is a lease accounting standard by the Financial Accounting Standards Board (FASB), requiring all leases longer than 12 months to be reflected on a company's balance sheet. This enhances financial transparency by giving a clear picture of an entity's lease obligations.

The basics of the new lease standard requires businesses to recognize both a right-of-use asset and corresponding lease liability for all leases exceeding 12 months on their balance sheets.

The new lease standard is codified under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842: Leases, and is effective for private companies with annual reporting periods beginning after December 15, 2021. Early implementation is permitted.

The new lease standard increases the scope and complexity of the financial statement footnote disclosure with additional requirements for both quantitative and qualitative disclosures. While providing useful information, using a spreadsheet to create these disclosures becomes far more difficult than before.

Footnote disclosures describe how the numbers in the statement of financial position, statement of activities and cash flow statements were determined and provide a sense of where the organization is going. Financial statements are required to provide full disclosure, including future contingencies and commitments.

IFRS 16 contains both quantitative and qualitative disclosure requirements. The objective of the disclosure requirements is to give a basis for users of financial statements to assess the effect that leases have on the financial statements. Entities should focus on the disclosure objective, not on a fixed checklist.