What is the Possession Date?
The possession date is the date that the item leased came into possession of the lessee. They gain complete control over the asset.
This date determines when the lessee recognizes their ROU asset and lease liability under ASC 842.
Additionally, the possession date is used to calculate the appropriate incremental borrowing rate, which is used to discount the future lease payments recorded on the balance sheet as a lease liability.
The possession date is sometimes the same as the commencement date, but not always.
Example: Delivery of the keys to the building or delivery of the asset (equipment). The amortization schedule starts from this date.