Under ASC 842, operating leases and financial leases have different amortization calculations. So the total debt towards the asset is reduced or amortized each month. Lease amortization is the process of taking the intangible asset within a lease agreement and reducing its value based on the historical cost, economic lifetime value, as well as the residual value.
In its essence an amortization is a reduction in value of an intangible asset. Understanding how to calculate your lease amortization schedules is fundamental to creating your journal entries under ASC 842.
We use a lease amortization schedule to amortize projected payments on a straight-line lease expense basis towards the principle of the lease throughout the lease term. Lease amortization is the process of paying down an operating or finance leased asset over time. Last Updated on Apby Morgan Beard What is Lease Amortization?
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