Under ASC 842, which leases must be reported on the balance sheet?

• A. Operating leases
• B. Short-term leases
• C. All leases
• D. No leases

Answer: (A)

Under ASC 842, leases with terms longer than 12 months must be shown on the balance sheet by recognizing a right-of-use asset and a lease liability. This applies to operating leases as well as finance leases, highlighting the shift from off-balance-sheet treatment to on-balance-sheet presentation. Short-term leases (12 months or less) may be exempt from balance-sheet recognition if the entity elects the exemption. Because short-term leases can be excluded and the notable change under ASC 842 centers on bringing operating leases onto the balance sheet, the category that must be reported on the balance sheet is operating leases.