ASC 842 accounting for an equipment lease
Manufacturing and construction equipment leases are often finance leases because the term covers most of the machine's useful life or includes a purchase option.
Typical term: 60 months (~5 yr)Paid in arrears
How to account for it
What to watch for on an equipment lease
Evaluate the five finance-lease criteria carefully for equipment — a $1 buyout or a term covering most of the useful life makes it a finance lease. The engine's classifier flags which criterion is met.
Worked example
No account neededAn equipment lease, computed live
This calculator is pre-loaded with a representative equipment lease. Change any field to match your lease — the present value, right-of-use asset, lease liability, schedule and disclosures recompute instantly.
Finance leaseASC 842 · 60 periods · commencing Jan 1, 2026
Initial lease liability
$209,602.98
PV of lease payments
Right-of-use asset
$209,602.98
At commencement
Total lease cost
$252,001.00
Over the full term
Imputed interest
$42,398.02
Undiscounted − PV
| # | Date | Payment | Interest | Principal | Liability | ROU amort. | ROU asset |
|---|---|---|---|---|---|---|---|
| 1 | Feb 1, 2026 | $4,200.00 | $1,310.02 | $2,889.98 | $206,713.00 | $3,493.38 | $206,109.60 |
| 2 | Mar 1, 2026 | $4,200.00 | $1,291.96 | $2,908.04 | $203,804.96 | $3,493.38 | $202,616.22 |
| 3 | Apr 1, 2026 | $4,200.00 | $1,273.78 | $2,926.22 | $200,878.74 | $3,493.38 | $199,122.84 |
| 4 | May 1, 2026 | $4,200.00 | $1,255.49 | $2,944.51 | $197,934.23 | $3,493.38 | $195,629.46 |
| 5 | Jun 1, 2026 | $4,200.00 | $1,237.09 | $2,962.91 | $194,971.32 | $3,493.38 | $192,136.08 |
| 6 | Jul 1, 2026 | $4,200.00 | $1,218.57 | $2,981.43 | $191,989.89 | $3,493.38 | $188,642.70 |
| 7 | Aug 1, 2026 | $4,200.00 | $1,199.94 | $3,000.06 | $188,989.83 | $3,493.38 | $185,149.32 |
| 8 | Sep 1, 2026 | $4,200.00 | $1,181.18 | $3,018.82 | $185,971.01 | $3,493.38 | $181,655.94 |
| 9 | Oct 1, 2026 | $4,200.00 | $1,162.32 | $3,037.68 | $182,933.33 | $3,493.38 | $178,162.56 |
| 10 | Nov 1, 2026 | $4,200.00 | $1,143.34 | $3,056.66 | $179,876.67 | $3,493.38 | $174,669.18 |
| 11 | Dec 1, 2026 | $4,200.00 | $1,124.22 | $3,075.78 | $176,800.89 | $3,493.38 | $171,175.80 |
| 12 | Jan 1, 2027 | $4,200.00 | $1,105.01 | $3,094.99 | $173,705.90 | $3,493.38 | $167,682.42 |
| 13 | Feb 1, 2027 | $4,200.00 | $1,085.66 | $3,114.34 | $170,591.56 | $3,493.38 | $164,189.04 |
| 14 | Mar 1, 2027 | $4,200.00 | $1,066.20 | $3,133.80 | $167,457.76 | $3,493.38 | $160,695.66 |
| 15 | Apr 1, 2027 | $4,200.00 | $1,046.61 | $3,153.39 | $164,304.37 | $3,493.38 | $157,202.28 |
| 16 | May 1, 2027 | $4,200.00 | $1,026.90 | $3,173.10 | $161,131.27 | $3,493.38 | $153,708.90 |
| 17 | Jun 1, 2027 | $4,200.00 | $1,007.07 | $3,192.93 | $157,938.34 | $3,493.38 | $150,215.52 |
| 18 | Jul 1, 2027 | $4,200.00 | $987.12 | $3,212.88 | $154,725.46 | $3,493.38 | $146,722.14 |
| 19 | Aug 1, 2027 | $4,200.00 | $967.03 | $3,232.97 | $151,492.49 | $3,493.38 | $143,228.76 |
| 20 | Sep 1, 2027 | $4,200.00 | $946.83 | $3,253.17 | $148,239.32 | $3,493.38 | $139,735.38 |
| 21 | Oct 1, 2027 | $4,200.00 | $926.50 | $3,273.50 | $144,965.82 | $3,493.38 | $136,242.00 |
| 22 | Nov 1, 2027 | $4,200.00 | $906.03 | $3,293.97 | $141,671.85 | $3,493.38 | $132,748.62 |
| 23 | Dec 1, 2027 | $4,200.00 | $885.45 | $3,314.55 | $138,357.30 | $3,493.38 | $129,255.24 |
| 24 | Jan 1, 2028 | $4,200.00 | $864.73 | $3,335.27 | $135,022.03 | $3,493.38 | $125,761.86 |
| 25 | Feb 1, 2028 | $4,200.00 | $843.89 | $3,356.11 | $131,665.92 | $3,493.38 | $122,268.48 |
| 26 | Mar 1, 2028 | $4,200.00 | $822.91 | $3,377.09 | $128,288.83 | $3,493.38 | $118,775.10 |
| 27 | Apr 1, 2028 | $4,200.00 | $801.81 | $3,398.19 | $124,890.64 | $3,493.38 | $115,281.72 |
| 28 | May 1, 2028 | $4,200.00 | $780.57 | $3,419.43 | $121,471.21 | $3,493.38 | $111,788.34 |
| 29 | Jun 1, 2028 | $4,200.00 | $759.19 | $3,440.81 | $118,030.40 | $3,493.38 | $108,294.96 |
| 30 | Jul 1, 2028 | $4,200.00 | $737.69 | $3,462.31 | $114,568.09 | $3,493.38 | $104,801.58 |
| 31 | Aug 1, 2028 | $4,200.00 | $716.05 | $3,483.95 | $111,084.14 | $3,493.38 | $101,308.20 |
| 32 | Sep 1, 2028 | $4,200.00 | $694.28 | $3,505.72 | $107,578.42 | $3,493.38 | $97,814.82 |
| 33 | Oct 1, 2028 | $4,200.00 | $672.36 | $3,527.64 | $104,050.78 | $3,493.38 | $94,321.44 |
| 34 | Nov 1, 2028 | $4,200.00 | $650.32 | $3,549.68 | $100,501.10 | $3,493.38 | $90,828.06 |
| 35 | Dec 1, 2028 | $4,200.00 | $628.13 | $3,571.87 | $96,929.23 | $3,493.38 | $87,334.68 |
| 36 | Jan 1, 2029 | $4,200.00 | $605.81 | $3,594.19 | $93,335.04 | $3,493.38 | $83,841.30 |
| 37 | Feb 1, 2029 | $4,200.00 | $583.34 | $3,616.66 | $89,718.38 | $3,493.38 | $80,347.92 |
| 38 | Mar 1, 2029 | $4,200.00 | $560.74 | $3,639.26 | $86,079.12 | $3,493.38 | $76,854.54 |
| 39 | Apr 1, 2029 | $4,200.00 | $538.00 | $3,662.00 | $82,417.12 | $3,493.38 | $73,361.16 |
| 40 | May 1, 2029 | $4,200.00 | $515.10 | $3,684.90 | $78,732.22 | $3,493.38 | $69,867.78 |
| 41 | Jun 1, 2029 | $4,200.00 | $492.08 | $3,707.92 | $75,024.30 | $3,493.38 | $66,374.40 |
| 42 | Jul 1, 2029 | $4,200.00 | $468.90 | $3,731.10 | $71,293.20 | $3,493.38 | $62,881.02 |
| 43 | Aug 1, 2029 | $4,200.00 | $445.59 | $3,754.41 | $67,538.79 | $3,493.38 | $59,387.64 |
| 44 | Sep 1, 2029 | $4,200.00 | $422.11 | $3,777.89 | $63,760.90 | $3,493.38 | $55,894.26 |
| 45 | Oct 1, 2029 | $4,200.00 | $398.51 | $3,801.49 | $59,959.41 | $3,493.38 | $52,400.88 |
| 46 | Nov 1, 2029 | $4,200.00 | $374.74 | $3,825.26 | $56,134.15 | $3,493.38 | $48,907.50 |
| 47 | Dec 1, 2029 | $4,200.00 | $350.84 | $3,849.16 | $52,284.99 | $3,493.38 | $45,414.12 |
| 48 | Jan 1, 2030 | $4,200.00 | $326.78 | $3,873.22 | $48,411.77 | $3,493.38 | $41,920.74 |
| 49 | Feb 1, 2030 | $4,200.00 | $302.58 | $3,897.42 | $44,514.35 | $3,493.38 | $38,427.36 |
| 50 | Mar 1, 2030 | $4,200.00 | $278.21 | $3,921.79 | $40,592.56 | $3,493.38 | $34,933.98 |
| 51 | Apr 1, 2030 | $4,200.00 | $253.71 | $3,946.29 | $36,646.27 | $3,493.38 | $31,440.60 |
| 52 | May 1, 2030 | $4,200.00 | $229.04 | $3,970.96 | $32,675.31 | $3,493.38 | $27,947.22 |
| 53 | Jun 1, 2030 | $4,200.00 | $204.22 | $3,995.78 | $28,679.53 | $3,493.38 | $24,453.84 |
| 54 | Jul 1, 2030 | $4,200.00 | $179.24 | $4,020.76 | $24,658.77 | $3,493.38 | $20,960.46 |
| 55 | Aug 1, 2030 | $4,200.00 | $154.12 | $4,045.88 | $20,612.89 | $3,493.38 | $17,467.08 |
| 56 | Sep 1, 2030 | $4,200.00 | $128.83 | $4,071.17 | $16,541.72 | $3,493.38 | $13,973.70 |
| 57 | Oct 1, 2030 | $4,200.00 | $103.39 | $4,096.61 | $12,445.11 | $3,493.38 | $10,480.32 |
| 58 | Nov 1, 2030 | $4,200.00 | $77.78 | $4,122.22 | $8,322.89 | $3,493.38 | $6,986.94 |
| 59 | Dec 1, 2030 | $4,200.00 | $52.02 | $4,147.98 | $4,174.91 | $3,493.38 | $3,493.56 |
| 60 | Jan 1, 2031 | $4,201.00 | $26.09 | $4,174.91 | $0.00 | $3,493.56 | $0.00 |
Citations & method
- • ASC 842-20-30-1 — initial measurement of the lease liability at the present value of lease payments.
- • ASC 842-20-30-5 — the right-of-use asset comprises the initial liability, prepaid lease payments and initial direct costs, less lease incentives received.
- • ASC 842-20-25-5 — for a finance lease, interest on the lease liability and amortization of the ROU asset are recognised separately.
- • ASC 842-10-25-2 — the five criteria for finance-lease classification.
- • ASC 842-20-50 — quantitative disclosure requirements (weighted-average term/rate, maturity analysis).
- Discount rate applied as a nominal monthly rate: 7.500% ÷ periods-per-year.
- Payments treated as made in arrears (ordinary annuity): interest accretes on the opening balance each period.
- Finance lease: the ROU asset amortizes straight-line and interest is front-loaded, so total expense is higher in early periods.
- A reasonably-certain purchase option is included in the final lease payment.
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