Weighted Average Discount Rate Report

The Weighted Average Discount Rate (WADR) report under ASC 842 is a critical component for lease accounting, especially when organizations have multiple leases with varying discount rates. Here's a detailed description:

The WADR report provides a single discount rate that represents the average of all discount rates used for a company’s leases, weighted by the lease liability associated with each lease. This rate is essential for financial reporting and helps in understanding the overall discount rate applied across all leases within an organization.

1. Lease Liabilities: The report includes the lease liabilities associated with each lease. These liabilities are typically the present value of future lease payments, calculated using the discount rate specific to each lease.

2. Individual Discount Rates: Each lease will have a specific discount rate applied, which is often the company’s incremental borrowing rate unless the rate implicit in the lease is readily determinable.

3. Weighted Calculation: The report calculates the WADR by weighting each individual lease's discount rate by the corresponding lease liability. This provides an aggregate rate that reflects the significance of each lease's impact on the company's financials.

4. Reporting Period: The WADR report is generated for specific reporting periods (e.g., quarterly or annually) and is typically included in the financial statement disclosures under ASC 842.

5. Financial Statement Disclosure: Companies must disclose the WADR in their financial statements to give users insight into the discount rates used in lease liability calculations.
- Internal Analysis: It aids in internal financial analysis, allowing companies to assess the overall cost of leasing and compare it to other financing options.
- Comparative Analysis: The WADR can be used for comparing lease portfolios year-over-year or between different entities within a conglomerate.