respond to: ASC $842-20($the lessee$)$:

When an applicable leasing contract is identified, both a right$-$of$-$use asset and lease liability at the value of discounted, future lease payments must be recognized $($Financial Accounting Standards Board, n$.$d$.).$ The right $-$of$-$use asset must also include any direct costs already incurred at the commencement date as well as any prepaid lease payments less any lease incentives. The appropriate amount of interest expense and principle repayment on the lease liability must be determined using the discount rate used to value the liability. The appropriate discount rate is the implicit rate in the lease, but if the implicit rate is not possible to determine, then the lessee's incremental borrowing rate can be used as the discount rate. Accounting for adjustments of the liability and right$-$of$-$use asset accounts each period is different depending on whether the contract is considered a finance lease or a operating lease. If the lease is classified as finance, then the lease liability is increased each period to reflect the period's accrued interest and reduced by the amount of money paid out to the lessor, and the rou asset is amortized on a straight$-$line basis over the course of the shorter of the lease term or the estimated useful life of the asset. If the lease is classified as operating, the lease expense is similarly reduced by lease payments, but lease expense is recognized instead of interest and amortization expense. For operating leases, the rou asset and lease liability are reduced by the same amount each year, but the timing of the accounts respective adjustments can differ.

If the lease contract is considered to be short$-$term, the lease can be expensed instead of capitalized.

ASC $842-30($the lessor$)$:

For a sales$-$type lease, the lessor must recognize a new asset created by the value of expected, discounted cash flows from the lease $($characterized as the net investment in the lease$),$ gains or losses on "sale" derived from the lease, and an expense including all initial direct costs if the asset's fair value does not match its carrying value $($Financial Accounting Standards Board, n$.$d$.).$ Although this new net investment in lease asset is recognized, the underlying asset being leased out must be derecognized. If payment on lease agreement is not probably the asset must be rerecognized and the lease payments shall be recognized as a deposit liability. If payment is probable, then payment from lessee will be split into interest income and payment towards the net investment asset. For operating leases, the leased asset remains the on the lessor's balance sheet meaning that the underlying asset is depreciated normally. For income recognition, no sales revenue is recognized, but rental income is recognized on a straight$-$line basis over the life over the course of the agreement. For a direct finacning lease accounting is the same as it is for a sales$-$type lease, but there is no gain or loss component.