Question:
What drives the ASC 842 Amortization Schedules?
Answer:
Adoption Date
Lease Commencement Date
Possession Date
More Details:
Here's a breakdown of the terms:
Adoption Date: This is the Parent of all lease schedules. The ASC 842 Start date drives the calculation of the schedule. For instance, if a private company has a calendar year-end (December 31st), its ASC 842 adoption date would have been January 1st, 2022 (the first day of the fiscal year following December 15, 2021).
After Adoption:
Lease Commencement Date: This is the date explicitly stated in the lease agreement as the official start of the lease term.
Possession Date: This is the date the tenant is legally allowed to move into the property and take possession. When both lease Commencement and Possession dates are entered, the Possession date drives the ASC 842 Amortization schedules.
In some cases, all three dates might coincide. However, there could be situations where there's a delay between signing the lease and the tenant being able to move in. The lease commencement date (official start) could be April 1st, but due to cleaning or repairs, the possession date (move-in) might not be until April 15th.
In conclusion, carefully review the lease agreement to identify the specific dates mentioned for Adoption Date, Lease Commencement Date, and Possession Date. The latest of these three dates will mark the official start of your lease.