Leases — ASC 842 vs IFRS 16

Both ASC 842 (US GAAP) and IFRS 16 (IFRS) put leases on the balance sheet — a right-of-use (ROU) asset and a lease liability. They diverge on the lessee model, which is the difference that matters most.

• Lease identification — a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration (the customer directs the use and obtains substantially all the economic benefits).
• Initial measurement — the lease liability is the present value of lease payments; the ROU asset is the liability plus initial direct costs and prepayments.
• Lessor accounting stays broadly aligned with prior models (sales-type / direct-financing / operating) under both frameworks.

Area	US GAAP (ASC 842)	IFRS 16
Lessee model	Dual — finance and operating leases	Single — substantially all leases capitalized
Expense pattern	Operating lease = single straight-line expense	Front-loaded (depreciation + interest)
Low-value asset exemption	None	Yes (in addition to short-term)
Short-term exemption	Yes (≤ 12 months)	Yes (≤ 12 months)

The dual-vs-single lessee model means the P&L geography and the expense profile differ for leases an entity would classify as operating under US GAAP.

• Lease term — inclusion of renewal/termination options “reasonably certain” to be exercised.
• Discount rate — rate implicit in the lease, or the incremental borrowing rate.
• Lease vs non-lease components — separating (and the practical expedient to combine).
• Lease classification (US GAAP lessee) — the five criteria.

• SAP implementation: SAP Lease Accounting / RE-FX — write-up forthcoming under SAP & Enterprise Systems. Parallel ledgers carry the US and IFRS measurement.

An educational reference and original synthesis — not investment advice, and not a substitute for the standard or for professional accounting guidance. For authoritative measurement detail, consult ASC 842 / IFRS 16 directly.