The footnote disclosures required under ASC 842 give readers a clear view of commitments related to leasing activity.

Under the previous standard, ASC 840, disclosures were limited to a simple maturity schedule. For many organizations, a basic spreadsheet did the trick.

Then the new lease standards came, transitioning to ASC 842. The new standard expanded disclosure requirements to include detailed quantitative and qualitative information. Every lease requires more context, more reconciliation, and more narrative precision.

While financial statements are now more useful, they’re also more time-consuming to produce. Manual spreadsheet workflows that once worked struggle with complex calculations, maturity analyses, and judgment-based narratives.

In this blog, we’ll break down disclosure requirements, ASC 842 disclosure examples, and how you can use automation to streamline your disclosure processes.

1. ASC 842 lease disclosures expand beyond simple maturity schedules, giving readers transparency into the amount and timing of cash flows from leases.
2. Two disclosure parts are required: quantitative and qualitative. Both are needed to tell the full financial story.
3. Quantitative disclosures include lease expense breakdowns, maturity analyses, weighted averages, and cash flow reconciliations tied to your financial statements.
4. Qualitative disclosures explain the context, covering existing leases, future lease commitments, and key judgments or assumptions made under the standard.
5. Common mistakes include missing variable lease details, unreconciled maturity tables, over-summarized narratives, inconsistent terms, and outdated prior-year data.
6. Automation simplifies everything. Lease accounting software tracks variable payments, syncs maturity data, standardizes terminology, provides qualitative templates, and refreshes disclosures in real time.

What ASC 842 Means for Disclosure

Under ASC 842, almost every lease creates a right-of-use (ROU) asset and a lease liability.

This was designed to increase visibility. Before ASC 842, operating leases were often off-balance sheet, making it harder to understand an organization’s true financial commitments. The new standard ensures transparency by reflecting the complete scope of leasing activity in financial statements.

The Financial Accounting Standards Board (FASB) expanded disclosure requirements to give financial statement users a more detailed look at both the amount and the timing of cash flows arising from leases. In other words, the footnotes show what you owe and explain why and how those lease numbers move through your books.

Who Has to Comply?

If your organization prepares financial statements in accordance with U.S. GAAP, you must comply with ASC 842. This includes public companies, private companies, and nonprofits.

In the next section, we’ll break down the two parts of ASC 842 lease disclosures and show how each one should look on your financial statements.

What Disclosures Are Required Under ASC 842? 

ASC 842 lease disclosures are designed to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases, uncovering the full story behind your ROU assets and liabilities.

To achieve that, the FASB requires two parts to the disclosure:

• Quantitative Disclosures: These are the numbers that tie directly back to your financial statements, including lease expense, maturity analysis, weighted averages, and cash flows.

• Qualitative Disclosures: These provide the context behind quantitative disclosures. It explains your leasing arrangements and management judgments, including nature of leases, renewal/termination options, variable payments, judgments & assumptions.

What’s the Difference Between Quantitative vs. Qualitative Disclosures?

Quantitative Disclosures

Quantitative ASC 842 disclosure requirements are straightforward and calculations-based. These disclosures tie directly to your financial statements and prove that your numbers line up. They’re essential for accuracy and audit readiness.

Quantitative disclosures must include:

• Lease expenses
• Maturity analysis
• Sale-leaseback details
• Operating and financing cash flows
• ROU assets obtained in exchange for lease liabilities
• Weighted average remaining lease term
• Weighted average discount rate

Qualitative Disclosures

Unlike quantitative disclosures, qualitative disclosures require discussion about the nature of the organization’s leasing arrangements. Qualitative disclosures require more judgment about what details to include.  To make qualitative disclosures as useful as possible on financial statements, they should not be too summarized or too detailed.

Qualitative disclosures should include:

• Existing leases - Information about the nature of the lease, including:

• General description of the leases
• Basis and terms and conditions on which variable payments are determined
• The existence and terms and conditions of options to extend or terminate leases including options that are not recognized as part of the ROU Asset and Lease Liability. 
• Existence and terms and conditions of residual value guarantees
• Restrictions or covenants imposed by leases

• Future leases - For leases that have not yet commenced but will add significant ROU Assets and Lease Liabilities to the books.

• Provide any information about the construction or design of the underlying asset 

• Judgement - Provide information about any significant assumptions and judgements made in applying the lease standard.

• How it was determined whether contracts contained a lease
• How payments for lease and non-lease components were allocated
• How discount rates were determined

Quantitative ASC 842 Disclosure Examples

Lease Expense Disclosure Example

Required Disclosure: Disaggregate total lease cost by category for the reporting period.

Maturity Analysis Disclosure Example

Required Disclosure: Present undiscounted future lease payments by year and lease type, then reconcile to balance sheet lease liabilities.

Cash Flow Disclosure Example

Required Disclosure: Disclose cash paid for lease liabilities, segmented by lease type and mapped to the statement of cash flows.

Sample Disclosure Statement:

During the year ended December 31, 2025, the Company paid $225,000 for operating lease liabilities (classified as operating activities) and $360,000 for finance lease liabilities, with $310,000 classified as financing activities and $50,000 as operating activities in the statement of cash flows.

Quantitative ASC 842 Disclosure Requirements

The quantitative disclosures required under ASC 842 provide a numeric summary of an entity’s lease activities and obligations. These disclosures are not examples, but are instead the minimum components that must be reported in the notes to the financial statements. The following items, as prescribed by ASC 842, should be disclosed for all lessees:

• Sale-Leaseback Transactions: Disclose key terms and conditions of sale-leaseback arrangements, and report any gains or losses from these transactions separately from those arising from the sale of other assets.
  
  

• Cash Flow Disclosures: Segregate the cash paid for amounts included in the measurement of lease liabilities between operating and financing activities, and clearly present these figures in the statement of cash flows.
  
  

• ROU Assets Obtained in Exchange for Lease Liabilities: Report the value of right-of-use (ROU) assets recognized in exchange for new finance or operating lease liabilities during the period.

These components are essential for audit readiness and standards compliance, as they enable users of the financial statements to evaluate the magnitude, timing, and uncertainty of lease-related cash flows in accordance with U.S. GAAP.

Cash Flow Disclosures Under ASC 842

ASC 842 requires specific disclosures about the cash flows related to lease liabilities. Lessees must disclose the total cash paid for amounts included in the measurement of lease liabilities, with a clear distinction between payments made for operating leases (classified as operating activities) and finance leases (typically split between operating and financing activities) in the statement of cash flows.

• Operating Lease Cash Flows: Payments related to operating leases are included within operating activities in the statement of cash flows. These reflect the periodic lease payments recognized as lease expense under the straight-line method.
  
  
• Finance Lease Cash Flows: Payments for finance leases are separated: the portion representing principal repayment is reported as a financing activity, while the portion representing interest is reported as an operating activity.
  
  
• Disclosure Purpose: The disclosure, “cash paid for amounts included in lease liabilities,” refers specifically to the actual cash outflows made to settle lease liabilities during the reporting period, excluding non-cash additions or modifications.
  
  
• Reconciliation to the Financial Statements: These amounts must tie directly to the respective operating and financing cash flow line items on the statement of cash flows. There is no optional treatment for this disclosure; it is required for all lessees applying ASC 842.

ROU Assets Obtained in Exchange for Lease Liabilities

A distinct quantitative disclosure under ASC 842 is the reporting of right-of-use (ROU) assets obtained in exchange for new lease liabilities. This is not a weighted average metric, nor is it subject to estimation or allocation. Instead, it is the actual value of ROU assets recognized at the commencement of new leases during the period, measured as equal to the new lease liabilities recorded.

• Disclosure Content: The amount disclosed should reflect ROU assets recognized at lease commencement in exchange for new finance or operating lease liabilities.
  
  
• Timing of Disclosure: This disclosure is updated each reporting period to capture new leases commenced within the year, excluding modifications to existing leases unless those modifications result in the remeasurement of lease liabilities and corresponding ROU assets.
  
  
• Audit Readiness and Significance: This figure is significant because it provides transparency into material changes in an entity’s lease portfolio—highlighting new commitments that impact future cash flows, and supporting audit procedures over completeness and accuracy of lease recognition.
  
  
• Compliance Emphasis: Failure to accurately report this disclosure can lead to audit deficiencies, as auditors and financial statement users rely on this metric to validate the entity’s compliance with initial measurement and recognition requirements under ASC 842.

ASC 842 Disclosure Examples: Qualitative

Under ASC 842, qualitative disclosures should provide a discussion around the nature of your lease arrangements and the key judgments management made during the reporting period.

Lease Disclosure Examples

This section should give a clear overview of your organization’s leases. Specifically, you’ll need to disclose:

• A general description of your leases, including subleases if applicable
• The basis, terms, and conditions on which variable lease payments are determined
• The existence and terms of any options to extend or terminate leases, including narrative disclosure about options that are recognized as part of the ROU Asset and Lease Liability and those that are not included 
• The existence and terms of residual value guarantees provided by the lessee
• Any restrictions or covenants imposed by leases

Example disclosure:

“The Company leases office facilities, equipment, and vehicles under non-cancelable operating and finance leases with remaining terms ranging from two to ten years. ROU Assets represent the Company’s right to use an underlying asset over the lease term and  Lease Liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU Assets and Lease Liabilities are recognized at lease commencement. The discount rate used to determine the present value of lease payments is the rate implicit in the lease unless not available, then the Risk Free Rate, as per policy election made at the time of adoption, is used. Some leases include options to extend for additional terms of up to five years, which the Company generally does not consider reasonably certain to exercise. Variable lease payments are tied to usage and changes in the Consumer Price Index. Sublease income from unused office space is immaterial.”

Future Lease Disclosure Examples

ASC 842 also requires disclosure of any leases that have not yet commenced but will materially impact the financial statements in future periods. This includes situations where an entity is involved in the construction or design of an underlying asset that will become subject to a lease.

Example disclosure:

“The Company has entered into an agreement to lease a new corporate headquarters currently under construction. The ten year lease term will commence upon completion of the building in late 2026 and is expected to result in the recognition of approximately $9.6 million in right-of-use assets and $9.5 million in lease liabilities.”

Judgment and Assumption Disclosure Examples

Perhaps the most subjective (and therefore critical) part of your qualitative disclosures, this section covers the significant assumptions and judgments during the reporting period.

You’ll need to include details such as:

• How you determined whether contracts contained a lease
• How you allocated consideration between lease and non-lease components, based on policy election
• How you determined your lease discount rates or incremental borrowing rates, based on policy election

Example disclosure:

“Management evaluates each contract at commencement to determine whether it contains an identified asset and conveys the right to control its use. For contracts with multiple components, consideration is allocated between lease and non-lease components based on relative standalone prices. The Company uses the rate implicit in the lease when available, or the Risk Free Rate based on policy election. ”

Common ASC 842 Disclosure Mistakes

Between rolling forward lease data, updating weighted averages, and double-checking every footnote, it’s easy for even the most experienced teams to slip up on ASC 842 disclosures.

Here are the most common ASC 842 disclosure mistakes we see:

1. Missing Variable Lease Details

Variable lease payments are one of the most overlooked disclosure requirements under ASC 842. These payments are tied to usage, performance metrics, or indices like CPI. They must be clearly described and separated from fixed payments in both quantitative and qualitative disclosures. However, many teams forget to identify or isolate variable components, leading to incomplete expense disclosures.

2. Failing to Reconcile Maturity Analysis with Lease Liabilities

Your maturity schedule should be tied to the total undiscounted cash flows, which are lease payments for the reporting period.  

3. Over-Summarized Qualitative Sections

Over-summarized qualitative disclosures fail to describe key terms, assumptions, and judgments, which is the very information FASB intended these sections to convey.

4. Inconsistent Terminology Between Finance and Operating Leases

Mixing up finance and operating lease terms (or using them interchangeably) is a classic compliance pitfall. Each has distinct recognition, expense, and disclosure requirements.

5. Copy-Pasting Prior-Year Notes Without Updating ROU Asset Data

Reused footnotes often miss new leases, term changes, and updated discount rates.

Streamline Your ASC 842 Lease Disclosures

ASC 842 lease disclosures may live in the footnotes, but they are highly important.

The problem? Between variable payment calculations, maturity analyses, and narrative updates, even the most organized accounting teams end up buried in spreadsheets, copy-pastes, and version mismatches.

That’s exactly where automation changes the game.

With Crunchafi, CPA firms can:

• Eliminate Manual Errors: Crunchafi automatically flags variable payment clauses and calculates related expenses, so nothing slips through the cracks.
• Ensure Accuracy Across Schedules: Maturity analyses sync directly from your lease data, applying consistent detail so every line item reconciles perfectly.
• Standardize Disclosures With Confidence: Structured qualitative templates guide teams to include the right amount of context.
• Stay Consistent, Every Time: Crunchafi enforces formatting and terminology across clients, ensuring each lease type is properly labeled and disclosed.

The result is audit-ready accuracy without the spreadsheet stress.

If you’re ready to simplify your footnote disclosure process for ASC 842, try Crunchafi’s Lease Accounting software today!