ASC 842: Completing the Initial Measurement of a Lease

We've covered what goes into lease payments and how to determine the discount rate. Now it's time to put everything together and calculate the opening lease liability and right-of-use asset. In this video, we walk through a complete initial measurement example — from the commencement date journal entry to what ends up on the balance sheet. We cover: The liability-first approach in ASC 842: calculating the present value of remaining lease payments as of commencement How to build the right-of-use asset — starting with the lease liability and adding payments made to the lessor before commencement and any initial direct costs How initial direct costs are defined under ASC 842, including commissions paid to brokers, and how they're temporarily recorded as prepaids before commencement The commencement date journal entry — debiting the ROU asset, crediting the lease liability, and clearing any prepaid accounts Why this entry is identical for both finance and operating leases By the end of this video, you'll understand: How to calculate the opening lease liability and right-of-use asset step by step What gets included in the ROU asset beyond just the liability How to record the initial measurement journal entry correctly at commencement In the next episode, we turn to subsequent measurement — everything that has to happen after the lease commences. 👉 Visit us at https://intellicasts.com to explore more resources and courses.