DIAMOND HILL INVESTMENT GROUP INC Leases Disclosure
Note 8 Operating Lease
On July 31, 2024, the Company entered into a 10-year extension of its lease through March 31, 2035, for office space of approximately 40,158 square feet at a single location. The Company's lease is classified as an operating lease.
As of December 31, 2025 and December 31, 2024, the carrying value of the right-of-use asset, which is included in on the consolidated balance sheets, was approximately $3.5 million and $3.4 million, respectively. As of December 31, 2025 and December 31, 2024, the carrying value of the lease liability was approximately $6.4 million and $6.3 million, respectively. The difference between the carrying value of the right-of-use asset and the lease liability primarily reflects the impact of lease incentives and deferred rent recognized at lease commencement.
The carrying value of the lease liability includes both principal and accrued interest on lease payments that are due in the current and future periods. Lease liability is measured at the present value of the remaining lease payments, discounted using the discount rate determined at the lease commencement date. For operating leases, interest on the lease liability is included within operating lease cost and is not presented separately.
As of December 31, 2025, the weighted average discount rate applied to the Company’s lease liability was 6.5%, reflective of the Company’s incremental borrowing rate. As of December 31, 2025, the weighted-average remaining lease term was approximately 9 years. The determination of the incremental borrowing rate involves judgment, including assumptions about the Company’s credit risk, economic conditions, and the lease-specific circumstances such as lease term and asset class. Changes in these assumptions could have a material impact on the measurement of the Company’s lease liability.
The following table summarizes the total lease and operating expenses for the years ended December 31, 2025, 2024 and 2023:
For the year ended December 31, |
|
|||||||||
2025 |
|
|
2024 |
|
|
2023 |
|
|||
$ |
1,008,345 |
|
|
$ |
934,353 |
|
|
$ |
908,516 |
|
Cash paid for operating leases included in operating cash flows was $0.7 million, $0.6 million, and $0.6 million for the years ended December 31, 2025, 2024, and 2023, respectively.
The following table provides a maturity analysis of the Company’s operating lease liability, based on undiscounted cash flows, as of December 31, 2025:
|
|
December 31, 2025 |
|
|
2026 |
|
|
821,231 |
|
2027 |
|
|
845,928 |
|
2028 |
|
|
871,429 |
|
2029 |
|
|
897,431 |
|
2030 |
|
|
924,437 |
|
2031 and Thereafter |
|
|
4,245,403 |
|
Total undiscounted operating lease payments |
|
|
8,605,859 |
|
Less: Imputed interest |
|
|
(2,207,639 |
) |
Present value of operating lease liability |
|
$ |
6,398,220 |
|
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.