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Is Right-of-use (ROU) Asset a Fixed Asset?

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Right-of-use (ROU) assets may be loosely defined as fixed assets because they are often treated similarly to property, plant, and equipment (PP&E), especially for finance leases ROU assets.

However, it is not incorrect to define the right-of-use (ROU) asset as intangible, as it represents the lessee’s right to operate an underlying asset. While the underlying asset is usually tangible, the right itself is intangible. In fact, according to GASB 87 (Governmental Accounting Standards Board), right-of-use (ROU) assets are intangible assets, which presents a solid argument for this discussion.

Here is the correct answer: it is more appropriate to classify right-of-use (ROU) assets as long-lived assets or non-current assets, which may include both tangible and intangible assets. A broader term like long-lived assets or non-current assets is always the safe answer.

In addition, US GAAP never formalized the term “Fixed Assets” even though it is used interchangeably with long-lived assets such as property, plant, and equipment. Therefore, the answer to the question “Is a right-of-use (ROU) asset a fixed asset?” won’t be a straightforward yes or no.

To help provide some ideas, we also presented a few examples in the section below of how major companies have grouped their ROU assets. (Spoiler: Finance leases ROU assets are often grouped with property, plant, and equipment – the typical fixed assets. While Operating lease ROU assets often have their own category under non-current assets.)

Related reading:

ASC 842 Journal Entries – Direct Financing Lease (Lessor)

ASC 842 Journal Entries – Sales-type Lease (Lessor)

ASC 842 Journal Entries – Operating Lease (Lessee and Lessor)

ASC 842 Journal Entries – Finance Lease (Lessee)

Month-To-Month Lease Under ASC 842

Right-of-use (ROU) assets in simple words

The right-of-use (ROU) asset is like a permission slip, where the lessee has been granted the right to use an asset, such as a car or equipment, for a certain period defined by the lease term (12 months, 24 months, etc.)

With the adoption of ASC 842, both operating and finance leases must present an asset and a liability on the balance sheet. The justification is that the lessee has now possessed an underlying asset, a resource that will generate returns in the future. In this article, we explained that those are the typical characteristics of an asset.

Similarities between right-of-use (ROU) assets and fixed assets

To present this comparison, let’s loosely define fixed assets as “property, plant, and equipment” (PP&E)

  • They are both considered non-current assets.
    • Fixed assets carry the assumption that the benefits-providing period is long-term, or most likely more than 12 months.
    • ROU assets share the same characteristics because the typical lease term is over 12 months. For short-term leases or those with a term shorter than 12 months, US GAAP allows them to be directly expensed instead of capitalized.
  • They will both record depreciation/amortization expenses.
    • Fixed assets typically record depreciation expenses on a straight-line basis.
    • ROU assets are similar.
      • For finance leases, ROU assets are also amortized on a straight-line basis. The amortization expense is often grouped with the depreciation of fixed assets.
      • For operating leases, ROU assets have a slightly different approach. Each month, the “amortization” expense is the difference between the lease payment and the interest expense. In addition, ASC 842 classifies the expense as an operating expense rather than depreciation, though the concept is the same as this expense is a reduction to the right-of-use asset balance.
  • They are both subject to the same impairment guidance.
    • ROU assets are subject to the treatment of impairment guidelines listed in ASC 360-10: property, plant, and equipment. In other words, when a triggering event occurs, ROU assets must be assessed; a recoverability test must be performed, just like how typical fixed assets are evaluated for impairment.

As a result, companies treat ROU assets very similarly to how they would treat typical fixed assets.

Real examples: Right-of-use (ROU) assets on the Balance Sheet

We looked into how the major companies have classified their right-of-use (ROU) assets on the balance sheet. The result will help us determine if referring to ROU assets as fixed assets is appropriate.


We reviewed Amazon’s 10-k (Annual Report) for the fiscal year ending December 31, 2022, and observed the following.

  • In FN1, Amazon clearly stated that assets acquired under finance leases are recorded in the line “Property, plant, and equipment, net,” while all other leases are classified as operating leases.

  • We then reviewed the presentation of the ROU assets on its balance sheet. We noted the “operating leases ROU assets” have their own line beneath “Property and equipment, net,” which indicates their non-current nature. We also assume the finance leases ROU assets are grouped with “Property and equipment, net,” given the disclosure in FN1 cited above.
  • In conclusion, Amazon grouped their finance lease ROU assets with property, plant, and equipment (PP&E), known colloquially as fixed assets. However, the operating lease ROU assets have their separate line and categorizations.


We also reviewed Apple’s 10-K for the fiscal year ended September 24, 2022, and had the following observations:

  • Apple straightforwardly disclosed in FN6 how they grouped their ROU assets.
  • Operating leases ROU assets appear on the “other non-current assets” line, while finance leases ROU assets are grouped with “property, plant and equipment, net,” the typical fixed assets.


Lastly, we reviewed Microsoft’s 10-k for the June 30, 2023 fiscal year.

  • Just like Apple, Microsoft disclosed in their FN1 how they grouped their ROU assets.
  • Operating lease right-of-use (ROU) assets have their own separate line on the balance sheet, while finance lease right-of-use (ROU) assets are included in property and equipment, the typical fixed assets.

The answer is very obvious now. Major companies often treat finance leases right-of-use (ROU) assets as part of property, plant, and equipment, which is widely referred to as fixed assets. On the other hand, operating leases right-of-use (ROU) assets often have their own separate line under non-current assets on the balance sheet.

Suppose you are familiar with the nuance between finance and capital leases. In that case, the way they are categorized on the balance sheet is consistent with their nature: finance leases have a stronger sense of ownership than operating leases, whereas the latter feel more like renting.

Related reading:

What Is a Lease Accountant and What Do They Do?

Key takeaways

  • Right-of-use (ROU) assets may be loosely defined as fixed assets, especially for finance leases ROU assets. However, it is not a perfect analog because the argument exists that the “Right” to use assets is intangible.
  • Major companies often group finance leases ROU assets with fixed assets. Operating leases ROU assets often have their separate line under the non-current assets.
  • It is more appropriate to classify right-of-use (ROU) assets as long-lived assets or non-current assets instead of referring to them as fixed assets.

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