Weighted-Average Discount Rate
Category
ASC 842
The weighted-average discount rate is a portfolio-level metric that represents the average rate used to discount lease liabilities, weighted by the size of each lease. It is a required disclosure under ASC 842 and provides stakeholders with insight into the overall cost of an organization's lease portfolio.
Why it matters
The weighted-average discount rate is a key disclosure that auditors and analysts use to evaluate lease liability measurements. A rate that seems unusually high or low relative to the organization's credit profile raises questions. The calculation must weight each lease's rate by its corresponding liability balance; a simple average across leases would be misleading for portfolios with significant size variation.
How Arvexi handles this
Arvexi calculates the weighted-average discount rate automatically across the portfolio, weighting each lease's rate by its liability balance. The metric updates dynamically as leases are added, modified, or terminated, and is included in standard disclosure reports.