Viewpoint: Applying ASC 360 to right-of-use assets

The new leases guidance in ASC 842 requires lessees to recognize right-of-use assets for most leases, including operating leases. In the Basis for Conclusions for ASU 2016-02, which codifies the new leasing guidance, the FASB describes a right-of-use asset as a long-lived nonfinancial asset. Under ASC 842, right-of-use assets, like other long-lived nonfinancial assets, fall within the scope of ASC 360, Property, Plant and Equipment, for purposes of evaluating whether the asset’s carrying amount is impaired.

Because the amendments to ASC 360 under ASU 2016-02 are limited, practitioners have questioned how to implement the subsequent measurement guidance in ASC 360 for right-of-use assets. This publication outlines those implementation questions and includes our views in response, citing guidance directly from the FASB Codification and presenting examples that we’ve created to illustrate its application.