Non-Lease Component
Category
General Concepts
A non-lease component is a separate element within a lease contract that transfers a good or service to the lessee beyond the right to use the underlying asset. Common examples include maintenance, insurance, common area maintenance (CAM) charges, and cleaning services bundled into a real estate lease payment.
Why it matters
Under ASC 842, lessees must separate lease components from non-lease components and allocate the contract consideration based on relative standalone prices. unless they elect the practical expedient to combine them. The election is made by asset class and significantly affects the ROU asset and lease liability amounts. Separating components reduces balance sheet amounts; combining them increases them. This is one of the most impactful accounting policy elections under ASC 842.
How Arvexi handles this
Arvexi identifies non-lease components during document extraction and supports both the separation and combination approaches. The platform tracks which practical expedient elections are in effect by asset class and applies them consistently across the portfolio, ensuring the lease and non-lease component allocation matches the organization's accounting policy.