What does lease liability mean on the CPA exam?
Lease liability. The lessee's obligation to make the remaining lease payments, measured at their present value. The right-of-use asset is built from it, so the two are equal only when there are no adjustments.
Defined against ASC 842-20-30-1.
Which CPA exam sections use lease liability?
Lease liability appears in 6 CPA exam sections: AUD, BAR, FAR, ISC, REG, TCP.
Other terms defined against ASC 842-20
- operating lease: A lease that does not transfer control.
- right-of-use asset: The lessee's asset representing its right to use the leased item for the lease term.
Related terms
- contract liability: The obligation to transfer goods or services for which the customer has already paid, or for which payment is unconditionally due.
- deferred tax liability: The deferred tax consequences of taxable temporary differences: income already in the books that the return has not taxed yet, or a deduction taken on the return ahead of the books.
- asset retirement obligation: A legal obligation associated with the retirement of a tangible long-lived asset, recognized at fair value in the period incurred, with an equal asset retirement cost capitalized into the asset.
- present value: What a future amount is worth today, once a discount rate has been applied for the waiting.
- finance lease: A lessee lease that meets one of five transfer-of-control tests.
- accretion expense: The increase in an asset retirement obligation from the passage of time, measured by the interest method at the credit-adjusted risk-free rate in effect when the liability was first measured.