Why is the first payment missing from the Lease Liability?
The first payment made at the beginning of a lease is excluded from the Lease Liability calculation under ASC 842, GASB 87, and GASB 96 because the liability only includes the present value of future payments, so this initial payment is instead included in the Right-of-Use (ROU) Asset.
There is a payment made at the beginning of the lease
When there is a payment made at the beginning of the lease, the payment is excluded from the Lease Liability.
Under ASC 842, GASB 87 and GASB 96, the Liability is calculated as the present value of committed future payments. When a payment is made at the beginning of the lease or subscription, it is not a future payment, therefore excluded from the Lease Liability calculation and included in the ROU Asset calculation.