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The video tutorial explains that companies often lease assets like buildings and equipment. A lease is a contract that allows control over an asset for a set period in exchange for payment. ASC 842 requires most leases to be recorded on the balance sheet, showing a lease liability and a right-of-use asset. To calculate the lease liability, one needs to determine the lease term, calculate lease payments, and discount them using the implicit rate or the lessee's borrowing rate.
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