{"id":5618,"date":"2026-02-02T11:32:10","date_gmt":"2026-02-02T15:32:10","guid":{"rendered":"https:\/\/visuallease.com\/?p=5618"},"modified":"2026-03-12T16:15:54","modified_gmt":"2026-03-12T20:15:54","slug":"accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842","status":"publish","type":"post","link":"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/","title":{"rendered":"ASC 842 Long-term, Short-term and Month-to-month Leases"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_is_a_lease_term\" >What is a lease term?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Lease_Lengths_Defined_Under_ASC_842\" >Lease Lengths Defined Under ASC 842<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Comparing_Short-Term_Long-Term_and_Month-to-Month_Leases\" >Comparing Short-Term, Long-Term and Month-to-Month Leases<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#ASC_842_Long-term_Lease_Accounting\" >ASC 842 Long-term Lease Accounting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Renewal_considerations_for_long-term_leases\" >Renewal considerations for long-term leases<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Best_practices_for_long-term_lease_renewals\" >Best practices for long-term lease renewals<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#ASC_842_Short-term_Lease_Accounting\" >ASC 842 Short-term Lease Accounting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Short-term_lease_renewal_challenges\" >Short-term lease renewal challenges<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#ASC_842_Month-to-Month_Lease_Accounting\" >ASC 842 Month-to-Month Lease Accounting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Why_organizations_use_month-to-month_leases\" >Why organizations use month-to-month leases<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Accounting_treatment_under_ASC_842\" >Accounting treatment under ASC 842<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Use_lease_lengths_to_your_advantage\" >Use lease lengths to your advantage<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_is_a_short-term_lease_under_ASC_842\" >What is a short-term lease under ASC 842?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Are_short-term_leases_operating_leases\" >Are short-term leases operating leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_happens_if_a_short-term_lease_is_renewed\" >What happens if a short-term lease is renewed?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_is_the_practical_expedient_for_short-term_leases\" >What is the practical expedient for short-term leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#How_does_ASC_842_define_a_long-term_lease\" >How does ASC 842 define a long-term lease?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Why_do_long-term_leases_require_more_planning_than_short-term_leases\" >Why do long-term leases require more planning than short-term leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_happens_if_a_long-term_lease_is_modified\" >What happens if a long-term lease is modified?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_is_the_practical_expedient_for_short-term_leases-2\" >What is the practical expedient for short-term leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Are_month-to-month_leases_considered_new_leases_each_month\" >Are month-to-month leases considered new leases each month?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#Can_month-to-month_leases_be_converted_into_long-term_leases\" >Can month-to-month leases be converted into long-term leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/visuallease.com\/accounting-for-long-term-short-term-and-month-to-month-leases-under-asc-842\/#What_controls_help_manage_month-to-month_leases_effectively\" >What controls help manage month-to-month leases effectively?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n[vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_column_text]Organizations are increasingly seeking flexible lease options, with short-term leases, leases with a maximum term of 12 months or less, becoming more popular. Lease accounting standards treat different lease lengths differently, which directly impacts how they appear in financial statements.<\/p>\n<p>Under the <a href=\"https:\/\/visuallease.com\/compliance\/asc-842\/\">ASC 842 requirements<\/a>, lease length drives how a contract must be classified and accounted for. Below, we define long-term, short-term, and month-to-month leases, and compare how each is treated in financial reporting.<\/p>\n<h2 id=\"whatIsLeaseTerm\"><span class=\"ez-toc-section\" id=\"What_is_a_lease_term\"><\/span><strong>What is a lease term?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A lease term refers to the specific duration for which a lease agreement is in effect. It is the period of time during which a tenant has the legal right to occupy and use the leased property, as outlined in the terms and conditions of the lease contract. Lease terms can vary widely depending on the type of property, the landlord&#8217;s preferences, and the negotiation between the parties involved. Lease terms are typically stated in months or years, and they establish the start date and the end date of the lease agreement. At the end of the lease term, the parties may choose to renew the lease, negotiate new terms, or vacate the property, as specified in the lease agreement.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Lease_Lengths_Defined_Under_ASC_842\"><\/span>Lease Lengths Defined Under ASC 842<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>For organizations that must comply with ASC 842, lease classifications are based on contract duration. The standard defines three common lease lengths:<\/p>\n<ul>\n<li><b>Short-term leases<\/b> last 12 months or less. These may qualify for the short-term lease practical expedient, which allows companies to exclude them from the balance sheet.<\/li>\n<li><b>Long-term leases<\/b> extend beyond 12 months and require recognition of right-of-use assets and lease liabilities.<\/li>\n<li><b>Month-to-month leases<\/b> continue without a set expiration date until canceled by either party, and are generally treated as short-term arrangements for accounting purposes.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Comparing_Short-Term_Long-Term_and_Month-to-Month_Leases\"><\/span>Comparing Short-Term, Long-Term and Month-to-Month Leases<span class=\"ez-toc-section-end\"><\/span><\/h3>\n[\/vc_column_text][vc_column_text]\n<table style=\"height: 233px\" width=\"1223\">\n<tbody>\n<tr>\n<td><b>Lease Type<\/b><\/td>\n<td><b>Definition (ASC 842)<\/b><\/td>\n<td><b>Balance Sheet Impact<\/b><\/td>\n<td><b>Typical Use Cases<\/b><\/td>\n<td><b>Renewal Considerations<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Short-Term Lease<\/b><\/td>\n<td>Lease term of 12 months or less. Practical expedient may apply.<\/td>\n<td>Off-balance sheet if expediently elected; expense recognized straight-line.<\/td>\n<td>Temporary office space, equipment rentals, copier leases.<\/td>\n<td>Renewal may reclassify as long-term if extended beyond 12 months. Successive year-to-year renewals may still qualify as short-term.<\/td>\n<\/tr>\n<tr>\n<td><b>Long-Term Lease<\/b><\/td>\n<td>Lease term greater than 12 months.<\/td>\n<td>Must recognize right-of-use asset and lease liability.<\/td>\n<td>Office buildings, retail locations, warehouses, fleet vehicles.<\/td>\n<td>Early planning (9\u201312 months) helps secure favorable terms and avoid defaults.<\/td>\n<\/tr>\n<tr>\n<td><b>Month-to-Month Lease<\/b><\/td>\n<td>No expiration date set; continues until terminated.<\/td>\n<td>Typically treated as short-term expense unless reclassified.<\/td>\n<td>Holdover situations, flexible arrangements while negotiating new space.<\/td>\n<td>Risky if unmanaged \u2014 can continue indefinitely at unfavorable rates.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n[\/vc_column_text]<div class=\"divider-wrap\"><div style=\"height: 30px;\" class=\"divider\"><\/div><\/div>[vc_column_text]\n<h2 id=\"ascLongTermAccounting\"><span class=\"ez-toc-section\" id=\"ASC_842_Long-term_Lease_Accounting\"><\/span>ASC 842 Long-term Lease Accounting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Long-term leases have a greater impact on financials, given they remain on the balance sheet for an extended period of time. When making contract renewal decisions for long-term leases, you may find yourself examining their <a href=\"https:\/\/visuallease.com\/asc-842-10-changes-you-need-to-know-about-your-balance-sheet\/\">impact on your balance sheet<\/a>.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Renewal_considerations_for_long-term_leases\"><\/span>Renewal considerations for long-term leases<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Generally, lease renewals involve exercising an option in a current contract or negotiating a new contract. When a contract includes a renewal option, you do not have to exercise it; instead, you can seek to renew the lease with new terms.<\/p>\n<p>For example, you might choose to not exercise an upcoming renewal option on an existing long-term lease with a new five-year term and higher rent than the current market rate. Instead, you could try to negotiate a lower price or a shorter lease term that will limit your commitment to the higher rent.<\/p>\n<p>Lately, more organizations have been negotiating their existing contracts to take advantage of lower market rates and\/or shorten their lease term.<\/p>\n<h3 id=\"bestPracticesLong\"><span class=\"ez-toc-section\" id=\"Best_practices_for_long-term_lease_renewals\"><\/span>Best practices for long-term lease renewals<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>To avoid unfavorable renewals or last-minute month-to-month conversions, companies should start the lease renewal process early \u2014 ideally 9 to 12 months prior to lease expiration. This provides time to:<\/p>\n<ul>\n<li>Explore alternative leases<\/li>\n<li>Benchmark current market rates<\/li>\n<li>Negotiate more favorable terms<\/li>\n<\/ul>\n<p>This is especially true for real estate leases, which are often long-term. Finding a new location and planning a move takes a lot of time and money. If you wait too long, or too close to the lease expiration, you could end up exercising an option you don\u2019t want or changing to a month-to-month lease because there is too little time to move or to negotiate a new contract.<\/p>\n<p>To avoid this, lease management software like Visual Lease can alert you about upcoming renewal deadlines and other critical dates. This is incredibly useful when planning next steps and making timely decisions.<\/p>\n<h2 id=\"ascShortTermAccounting\"><span class=\"ez-toc-section\" id=\"ASC_842_Short-term_Lease_Accounting\"><\/span>ASC 842 Short-term Lease Accounting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Under ASC 842, the \u201cshort-term\u201d lease designation can be applied to an entire class of leases rather than on a lease-by-lease basis. By electing this practical expedient, short-term leases do not need to be reported on the balance sheet. This and other <a href=\"https:\/\/visuallease.com\/asc-842-practical-expedients-and-transition-requirements\/\">practical expedients<\/a> simplify the lease classification process and help organizations more easily adhere to the new lease standard.<\/p>\n<p>That means when you are first classifying and entering your leases into a lease management system, you should decide up front whether all leases of a particular asset class will be designated as short-term leases. For example, you might decide to treat all real estate leases or all equipment leases (or a particular type of equipment, such as copiers) of one year or less as short-term leases.<\/p>\n<p>If you elect to apply the short-term designation, all leases that are one year or less in duration will be handled as short-term leases, with no exceptions. If you choose not to elect the practical expedient, then all leases will be considered long-term regardless of their duration.<\/p>\n<h3 id=\"shortChallenges\"><span class=\"ez-toc-section\" id=\"Short-term_lease_renewal_challenges\"><\/span>Short-term lease renewal challenges<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Just like long-term leases, short-term leases can be renewed by exercising an option or negotiating a new contract. However, exercising an option or extending the length of a short-term lease is tricky because it can affect the \u201cshort-term\u201d classification. Consider two common scenarios:<\/p>\n<ul>\n<li><strong>Scenario 1:<\/strong> A one-year lease with a renewal option exercised three months before expiration extends to 24 months. This exceeds the short-term threshold and must be reclassified as a long-term lease.<\/li>\n<li><strong>Scenario 2:<\/strong> A one-year lease renewed only at the end of the term may be treated as a new, separate short-term lease. In this case, an organization could occupy the same space for multiple years while recognizing successive short-term leases.<\/li>\n<\/ul>\n<p>Because renewal timing impacts classification, organizations must track lease dates closely to avoid compliance issues. A <a href=\"https:\/\/visuallease.com\/solutions\/lease-management-software\/\">lease management software<\/a> such as Visual Lease makes it easy to set up fields for different asset classes (such as real estate and equipment) and select which (if any) should be treated as short-term leases. With all your lease information in the system, the Visual Lease platform can then automatically determine which leases meet the short-term lease criteria based on the designated asset classes and contract dates and properly report the expense.<\/p>\n<h2 id=\"ascMtMAccounting\"><span class=\"ez-toc-section\" id=\"ASC_842_Month-to-Month_Lease_Accounting\"><\/span>ASC 842 Month-to-Month Lease Accounting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Sometimes organizations allow existing leases to become month-to-month to delay decisions about long-term commitments. Ideally, an organization would have a minimum number of these leases and manage them strategically \u2014 making a conscious decision to go month-to-month for a limited time only.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_organizations_use_month-to-month_leases\"><\/span>Why organizations use month-to-month leases<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Organizations may have month-to-month leases because renewals were not completed on time or sometimes the organization does not have a good strategy for replacing month-to-month leases and ends up continuing them \u201cby default\u201d rather than by choice.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Accounting_treatment_under_ASC_842\"><\/span>Accounting treatment under ASC 842<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>From an accounting perspective, month-to-month leases are generally treated as short-term leases, unless reclassified. To remain compliant, organizations must be able to:<\/p>\n<ul>\n<li>Update lease records quickly<\/li>\n<li>Track rent and holdover charges<\/li>\n<li>Report expenses accurately in disclosure reports<\/li>\n<\/ul>\n<p>With Visual Lease software, you can change the status of a month-to-month lease at any time. <a href=\"https:\/\/visuallease.com\/solutions\/lease-management-software\/\">Lease management<\/a> and <a href=\"https:\/\/visuallease.com\/solutions\/lease-accounting-software\/\">accounting software<\/a> lets you easily modify lease information, change the commencement date and add a forecasted expiration date and other data to create a new schedule and calculations for month-to-month tenancy.<\/p>\n<p>Visual Lease also makes it easy to track the dollars associated with a month-to-month lease, including any rent that applies during a holdover as well as straight-line rent expenses. The system can even identify month-to-month leases and show them as short-term lease expenses in disclosure reports.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Use_lease_lengths_to_your_advantage\"><\/span>Use lease lengths to your advantage<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>By understanding how the different lease terms are defined, you can more simply manage them in a strategic way.<\/p>\n<p>Using a <a href=\"https:\/\/visuallease.com\/solutions\/lease-management-software\/\">lease management software<\/a> platform like Visual Lease allows your organization to strategically manage lease terms by:<\/p>\n<ul>\n<li>Applying consistent treatment to leases according to classification, asset class and any practical expedients that are elected<\/li>\n<li>Providing tools for creating, tracking, reporting and analyzing lease terms and costs<\/li>\n<li>Alerting decision makers about critical lease dates and deadlines for exercising lease options and renewals<\/li>\n<\/ul>\n<p>With the right tools, organizations can make more informed decisions about when to commit to long-term agreements, use short-term flexibility, or strategically manage month-to-month leases.<\/p>\n<p>Learn more about how to account for different lease terms from one of Visual Lease\u2019s in-house experts. Check out our on-demand webinar <a href=\"https:\/\/engage.visuallease.com\/content\/managing-short-term-long-term-and-month-to-month-leases-webinar\">Managing Short-Term, Long-Term and Month-to-Month Leases (and Everything in Between).<\/a>[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=&#8221;full_width_background&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; class=&#8221;faq_vl_cs&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221; shape_type=&#8221;&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_custom_heading text=&#8221;Frequently Asked Questions about Lease Terms Under ASC 842&#8243;]<div class=\"divider-wrap\"><div style=\"height: 10px;\" class=\"divider\"><\/div><\/div>[vc_custom_heading text=&#8221;Short-term Leases&#8221; font_container=&#8221;tag:h3|text_align:left&#8221;]<div class=\"toggles \" data-style=\"minimal\"><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_is_a_short-term_lease_under_ASC_842\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What is a short-term lease under ASC 842?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]A short-term lease is any lease with a maximum term of 12 months. With the practical expedient, these leases are excluded from the balance sheet.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Are_short-term_leases_operating_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Are short-term leases operating leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Yes. They are classified as operating leases but can remain off-balance sheet when the expedient is applied.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_happens_if_a_short-term_lease_is_renewed\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What happens if a short-term lease is renewed?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]If the renewal extends the term beyond 12 months, the lease must be reclassified as long-term. Successive one-year renewals may still qualify as separate short-term leases.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_is_the_practical_expedient_for_short-term_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What is the practical expedient for short-term leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]It is an ASC 842 election that allows companies to exclude short-term leases from balance sheet recognition, applied consistently across an asset class.[\/vc_column_text]<\/div><\/div><\/div><div class=\"divider-wrap\"><div style=\"height: 10px;\" class=\"divider\"><\/div><\/div>[vc_custom_heading text=&#8221;Long-term Leases&#8221; font_container=&#8221;tag:h3|text_align:left&#8221;]<div class=\"toggles \" data-style=\"minimal\"><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"How_does_ASC_842_define_a_long-term_lease\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>How does ASC 842 define a long-term lease?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]A long-term lease is any agreement with a term longer than 12 months. These contracts must be reported on the balance sheet as right-of-use assets with corresponding lease liabilities.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Why_do_long-term_leases_require_more_planning_than_short-term_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Why do long-term leases require more planning than short-term leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Because they remain on the balance sheet, long-term leases affect financial ratios, borrowing capacity, and future flexibility. Early planning helps organizations balance stability with financial impact.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_happens_if_a_long-term_lease_is_modified\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What happens if a long-term lease is modified?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]If lease terms change \u2014 such as extending the end date, adjusting rent, or altering space usage \u2014 ASC 842 requires a reassessment. This may lead to re-measurement of the right-of-use asset and liability.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_is_the_practical_expedient_for_short-term_leases-2\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What is the practical expedient for short-term leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]It is an ASC 842 election that allows companies to exclude short-term leases from balance sheet recognition, applied consistently across an asset class.[\/vc_column_text]<\/div><\/div><\/div><div class=\"divider-wrap\"><div style=\"height: 10px;\" class=\"divider\"><\/div><\/div>[vc_custom_heading text=&#8221;Month-to-Month Leases&#8221; font_container=&#8221;tag:h3|text_align:left&#8221;]<div class=\"toggles \" data-style=\"minimal\"><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Are_month-to-month_leases_considered_new_leases_each_month\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Are month-to-month leases considered new leases each month?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]No. A month-to-month lease is treated as a single, ongoing contract that renews automatically until canceled. However, each additional month adds to the total lease term.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Can_month-to-month_leases_be_converted_into_long-term_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Can month-to-month leases be converted into long-term leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Yes. If both parties agree, a month-to-month arrangement can be formalized into a long-term lease. This change must be reflected in accounting records as a new contract.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_controls_help_manage_month-to-month_leases_effectively\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What controls help manage month-to-month leases effectively?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Centralized lease management tools can track expiration risks, flag leases that have rolled into month-to-month status, and ensure decisions are made strategically rather than by default.[\/vc_column_text]<\/div><\/div><\/div>[\/vc_column][\/vc_row]\n","protected":false},"excerpt":{"rendered":"<p>[vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_column_text]Organizations are increasingly seeking flexible lease options, with short-term leases, leases with&#8230;<\/p>\n","protected":false},"author":2,"featured_media":5619,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[170],"tags":[185,186,189,188],"company_size":[],"company_portfolio_size":[],"company_industry":[],"case_study_topic":[],"class_list":["post-5618","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lease-accounting","tag-asc-842","tag-ifrs-16","tag-private-companies","tag-public-companies"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/5618","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/comments?post=5618"}],"version-history":[{"count":0,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/5618\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media\/5619"}],"wp:attachment":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media?parent=5618"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/categories?post=5618"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/tags?post=5618"},{"taxonomy":"company_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_size?post=5618"},{"taxonomy":"company_portfolio_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_portfolio_size?post=5618"},{"taxonomy":"company_industry","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_industry?post=5618"},{"taxonomy":"case_study_topic","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/case_study_topic?post=5618"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}