What is Specialized Use?
Specialized use applies to the determination of lease classification, added with ASC 842.
Specialized use applies if the asset is so specialized in nature that it provides no value to the lessor once the lease has expired.
For example, if the original asset is used by house employees, but will later be converted into residential property, this would not be specialized, as this would be considered an alternative use.
How This Works in LeaseGuru
During lease entry, LeaseGuru performs the Finance vs. operating test for specialized use for you:
- There is a toggle on the"Options" tab called “Is the asset specialized in nature?” which will default to “No”
- This toggle can only be set to yes if the lease start date is after the transition date
- If it is toggled to “Yes” and the lease is classified as Operating, the system will prompt the user to change lease type or override the test