What does ASC 842 do? The new ASC 842 standard for lease accounting requires all leases longer than 12 months to be recorded as assets and liabilities on balance sheets. The Financial Accounting Standards Board, or FASB, created this new standard to foster more transparency between investors and companies. ASC 842 replaces the previous lease accounting standard, ASC 840, under which certain leases could be classified as “operating leases” and written off as operational expenses. As a result, they were excluded from calculations such as return on assets, and these exclusions could give an investor a false depiction of a company’s performance. With ASC 842, all organizations following generally accepted accounting principles, or GAAP, are required to categorize all leases as both liabilities and right-of-use assets.