Quick Summary
This guide compares the three major lease accounting standards, ASC 842, IFRS 16, and GASB 87, covering who each applies to, how lessee treatment differs, and what disclosures each requires. It includes a side-by-side comparison table, the five practical issues that most commonly trip up adoption projects, and a step-by-step adoption timeline covering inventory, abstraction, calculation, disclosure, and ongoing maintenance.
Three separate lease accounting standards exist because three different regulatory bodies serve three different populations: ASC 842 governs US-based public and private companies under US GAAP, IFRS 16 applies internationally to companies reporting under IFRS, and GASB 87 covers US state and local government entities. A company operating only in the US as a private entity deals with just one of these. A multinational with US operations and international subsidiaries, or a company that does business with government entities, may need to understand more than one at once.
The three standards share a common goal, bringing lease obligations onto the balance sheet that were previously left in the footnotes, but they differ in scope, lessee treatment, and specific disclosure requirements in ways that matter considerably once an adoption project is underway. This guide compares the three standards directly and walks through what actually trips up adoption in practice.
What Is ASC 842?
ASC 842 is the lease accounting standard issued by the Financial Accounting Standards Board (FASB) under US GAAP. It applies to any entity, public or private, that prepares financial statements under US GAAP and holds leases for real estate, equipment, vehicles, or other assets.
Under ASC 842, lessees classify each lease as either operating or finance. Both types get recorded on the balance sheet as a right-of-use asset and a corresponding lease liability, but the income statement treatment differs: operating leases produce a single, straight-line lease expense, while finance leases split the expense into separate interest and amortization components. This classification distinction is one of the more consequential decisions in an ASC 842 adoption, since it affects how lease costs show up in reported earnings even though both lease types now appear on the balance sheet. For help managing this ongoing calculation and classification work, lease accounting services covers what accurate, sustained compliance actually requires.
What Is IFRS 16?
IFRS 16 is issued by the International Accounting Standards Board (IASB) and applies to companies reporting under International Financial Reporting Standards, common outside the US and among multinational companies with international listings or subsidiaries.
The most significant difference from ASC 842 is IFRS 16’s single lessee model: nearly all leases are treated the same way on the balance sheet, recorded as a right-of-use asset and a lease liability, with the income statement expense split into depreciation and interest regardless of what would have been classified as an operating lease under US GAAP. This removes the operating-versus-finance distinction entirely for lessees, which simplifies classification but changes how lease expense flows through the income statement compared to ASC 842.
What Is GASB 87?
GASB 87 is issued by the Governmental Accounting Standards Board and applies specifically to US state and local government entities, public school districts, and other government-related organizations reporting under GAAP for governments rather than private-sector GAAP.
Like IFRS 16, GASB 87 uses a single model for lessees rather than splitting leases into operating and finance categories. Nearly every lease gets recorded as a lease liability and a corresponding intangible right-to-use asset, with amortization and interest expense recognized separately. Government entities working through GASB 87 adoption often deal with lease populations that include unique government-specific arrangements, interagency agreements or leases tied to public infrastructure, that don’t have a clean private-sector parallel.
ASC 842 vs. IFRS 16 vs. GASB 87: Side by Side
| Factor | ASC 842 | IFRS 16 | GASB 87 |
| Issued by | FASB | IASB | GASB |
| Applies to | US public and private companies (US GAAP) | Companies reporting under IFRS (international) | US state and local government entities |
| Lessee model | Dual: operating vs. finance classification | Single model for nearly all leases | Single model for nearly all leases |
| Balance sheet treatment | Right-of-use asset and lease liability for both lease types | Right-of-use asset and lease liability | Lease liability and intangible right-to-use asset |
| Income statement | Straight-line expense (operating) or interest/amortization split (finance) | Depreciation and interest, regardless of classification | Amortization and interest, recognized separately |
| Key disclosures | Lease cost breakdown, weighted-average term and discount rate, maturity analysis | Similar maturity and expense disclosures, IFRS-specific format | Government-specific disclosure requirements under GASB standards |
| Effective dates | Public companies: fiscal years after Dec 15, 2018; private companies: fiscal years after Dec 15, 2021 | Effective for annual periods beginning on or after Jan 1, 2019 | Effective for fiscal years beginning after June 15, 2021 |
For a closer look at how ASC 842 adoption specifically affects reported balance sheet figures, see this analysis of ASC 842’s balance sheet impact.
5 Things That Actually Trip Teams Up in Adoption
- Accounting calculations are the easy part. The math behind right-of-use assets and lease liabilities is straightforward once the underlying concepts are familiar. What takes real effort is everything that happens before the calculation: gathering data from procurement, real estate, HR, technology, and treasury, since each of these functions holds a piece of the information needed to identify and value leases correctly.
- Leases exist far beyond real estate. Real estate leases are the easiest to spot and often the largest by dollar value, but printers, vehicles, warehousing agreements, and even service contracts with embedded leases can all fall under the standard. By count, non-real estate leases typically outnumber real estate leases by a wide margin, even though they’re individually less material. A materiality threshold, discussed and agreed with your auditor, can reduce the burden of chasing down every small-dollar lease.
- Documentation quality determines how hard this gets. Undocumented commencement dates, leases acquired through an acquisition with incomplete records, and contracts executed outside normal procurement channels are the most common sources of delay. Without a located, reviewable contract, a calculation can’t be properly supported if an audit ever asks for it.
- There’s no single correct way to implement the standard. Materiality decisions, documentation availability, and subjective assumptions vary by company, and application can look meaningfully different between two similar organizations. What matters more than picking the theoretically perfect approach is applying your chosen policies consistently over time, so period-to-period comparisons stay valid, and keeping your auditor involved throughout the process rather than only at the end.
- Compliance doesn’t stop at the adoption date. The initial calculation is the first step, not the finish line. Portfolios with assets moving in and out of service, or leases that turn over regularly, need an ongoing process, not a one-time project repeated from scratch every reporting period. Building this into standard operations, rather than treating each period as a fresh special project, is what separates a sustainable compliance process from a recurring scramble.
A Practical Adoption Timeline and Steps
Inventory. Identify every lease across every function, real estate, equipment, vehicles, service contracts with embedded leases, and confirm which entities and reporting units they fall under. This step alone often takes longer than expected, since leases frequently exist outside a centralized procurement process.
Abstract. Pull the specific data each lease requires: commencement date, term, payment schedule, renewal options, and any variable payment terms. Abstraction quality directly determines calculation accuracy, an error here propagates into every downstream number.
Calculate. Apply the appropriate standard’s model to classify each lease and calculate the right-of-use asset and liability. This is the step most adoption projects assume will be the hardest, when in practice it’s usually the most mechanical once the first two steps are done correctly.
Disclose. Prepare the specific disclosures your standard requires: lease cost breakdowns, weighted-average terms and discount rates, and maturity analyses. Review these with your auditor before the reporting deadline, not after a draft is already finalized.
Maintain. Set up an ongoing process for capturing new leases, amendments, and terminations as they happen, rather than treating each reporting period as a standalone project. For a repeatable structure to follow month over month, see our monthly lease accounting checklist.
How Scribcor Supports Lease Accounting Compliance
Accurate lease accounting starts with accurate underlying data, which is why Scribcor’s role in a compliance project centers on lease abstraction: pulling and structuring the specific terms each standard’s calculation depends on, then reviewing that output against the source document before it feeds any calculation.
Once the initial adoption calculations are complete, that same data needs ongoing attention as leases change, renew, or terminate. Our lease administration services keep this data current so compliance doesn’t require a fresh special project every reporting period, no matter which of the three standards applies.
Getting the Comparison Right
ASC 842, IFRS 16, and GASB 87 share a common purpose but differ enough in scope and lessee treatment that assuming one standard’s rules apply universally is a common and costly mistake. Getting the comparison right at the start of an adoption project, and building a sustainable process rather than a one-time push, is what determines if compliance holds up year after year.
If you’re working through adoption or want a review of your current compliance process, schedule a Lease Accounting Consultation with Scribcor. We’ll look at your lease population and current process, then show you specifically where the gaps are.
Schedule a Lease Accounting Consultation
FAQs
What’s the main difference between IFRS 16 and ASC 842?
IFRS 16 uses a single lessee model where nearly all leases are treated the same way on the balance sheet and income statement. ASC 842 keeps a dual classification, operating versus finance, which changes how lease expense is presented on the income statement even though both lease types appear on the balance sheet under US GAAP.
Does GASB 87 apply to private companies?
No. GASB 87 applies specifically to US state and local government entities, public school districts, and similar government-related organizations. Private and public companies fall under ASC 842 if reporting under US GAAP, or IFRS 16 if reporting under IFRS.
When did these lease accounting standards become effective?
ASC 842 took effect for public companies in fiscal years after December 15, 2018, and for private companies after December 15, 2021. IFRS 16 became effective for annual periods beginning on or after January 1, 2019. GASB 87 took effect for fiscal years beginning after June 15, 2021.