Lease and nonlease components

A contract can contain separate rights to use assets, service components, and activities that transfer no separate good or service. Component accounting identifies those parts and allocates contract consideration before lease measurement.

Separate and allocate

A right to use an asset can be a separate lease component when the lessee can benefit from it on its own or with readily available resources. The right also must not depend heavily on, or be highly interrelated with, other rights in the contract. Maintenance or operating services are common nonlease components. Administrative tasks that transfer nothing to the customer are not components, although their consideration must still be allocated.

A warehouse contract may provide the building, common-area maintenance, and a security deposit. The building right can be a lease component, maintenance can be a nonlease service, and the deposit follows its own accounting. The lessee normally allocates consideration using relative standalone prices. A permitted class-of-asset practical expedient can combine lease and associated nonlease components, but the election and resulting accounting must be documented.

This decision determines which consideration reaches the lease-payment stream; it does not decide lease classification. Read ASC 842-10-15-28 through 15-31 for component separation and ASC 842-10-15-33 for lessee allocation.