What is a Right-of-Use (ROU) asset under ASC 842?

A Right-of-Use (ROU) asset represents a lessee's right to use an underlying asset for the specified lease term. It is recognized on the balance sheet at lease commencement.

How does ASC 842 differentiate between operating and finance leases?

For finance leases, lessees recognize separate interest and amortization expenses on the income statement. For operating leases, lessees recognize a single, straight-line lease expense over the term.

How is the discount rate determined for lease liabilities?

The discount rate should be the rate implicit in the lease if readily determinable. If not, the lessee uses its incremental borrowing rate (IBR), reflecting the rate to borrow similar funds over a similar term.