Allison Transmission Holdings Inc Leases Disclosure
NOTE 12. LEASES
Lessee Accounting
Contracts are assessed by the Company to determine if the contract conveys the right to control an identified asset in exchange for consideration during a period of time. The Company classifies all identified leases as either operating or finance leases. The Company's operating leases consist of real estate, vehicles and IT equipment. As of both December 31, 2025 and 2024, the Company was not a party to any finance leases. Contracts that contain leases are assessed to determine if the consideration in the contract is related to a lease component, non-lease component or other components not related to the lease. Lease components are recorded as right-of-use (“ROU”) assets and lease liabilities while any non-lease component is expensed as incurred. The consideration in the contract related to other components not related to the lease is allocated among the lease component and the non-lease component, as applicable, based on the stand-alone selling price of the lease and non-lease components.
Certain lease contracts may contain an option to extend or terminate the lease. The Company considers the economic impact of extension and termination options by contract. If the Company concludes it is reasonably certain an option will be exercised, that option is included in the lease term and impacts the amount recorded as an ROU asset and lease liability upon inception of the contract.
ROU assets are calculated as the related lease liability adjusted for lease incentives, any initial direct costs, prepayments and the effect of escalating lease payments on period expense. As of December 31, 2025 and December 31, 2024, total were $18 million and $20 million, respectively, and were recorded in Other non-current assets in the Consolidated Balance Sheets. During the years ended December 31, 2025 and 2024, the Company recorded $3 million and $7 million, respectively, of new ROU assets obtained in exchange for lease obligations.
The Company's lease liability is determined by discounting the future cash flows over the lease period. The Company determines its discount rates utilizing current secured financing rates based on the length of the lease period plus the Company's margin over Term SOFR on the Term Loan. The Company believes this rate effectively represents a borrowing rate the Company could obtain on a debt instrument possessing similar terms as the lease. Lease liabilities are classified between current and non-current liabilities based on the terms of the underlying leases. The weighted average discount rate on operating leases as of December 31, 2025 and 2024 was 4.86% and 4.84%, respectively.
As of December 31, 2025, the Company recorded and operating lease liabilities of $5 million and $13 million, respectively. As of December 31, 2024, the Company recorded and operating lease liabilities of $6 million and $14 million, respectively. The Company's current and non-current operating lease liabilities are recorded in Other current liabilities and Other non-current liabilities, respectively, in the Consolidated Balance Sheets. The following table reconciles future undiscounted cash flows for operating leases to total operating lease liabilities as of December 31, 2025 (dollars in millions):
|
|
December 31, |
|
|
2026 |
|
$ |
6 |
|
2027 |
|
|
5 |
|
2028 |
|
|
4 |
|
2029 |
|
|
1 |
|
2030 |
|
|
1 |
|
Thereafter |
|
|
3 |
|
Total lease payments |
|
$ |
20 |
|
Less: Interest |
|
|
2 |
|
|
$ |
18 |
|
|
The weighted average remaining lease term as of December 31, 2025 and December 31, 2024 was 4.8 years and 5.1 years, respectively.
Operating lease expense was $7 million for each of the years ended December 31, 2025 and 2024 and was recorded within Selling, general and administrative expense and Engineering — research and development on the Company's Consolidated Statements of Comprehensive Income. There was no material short-term operating lease expense for either of the years ended December 31, 2025 or 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 27, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.