Sonder Landlords Approach Rivals To Take Over Properties

Lessor – An entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration. Intragovernmental (IGT) Lease – Per SFFAS 54, is a lease between Federal entities documented via an interagency agreement. In the Federal real property lexicon, the term ‘permit’ and ‘occupancy agreement’ are commonly accepted terms to describe an agency-to-agency, interagency or intragovernmental lease. For the purpose of this policy chapter, the term ‘intragovernmental lease’ is used throughout the document. Enhanced Use Lease (EUL) – An agreement to lease VA owned property to an entity to finance, develop, operate, and maintain property for the purpose as provided for in 38 U.S.C. § 8162. This is a negotiated arrangement between the Department and another entity for the use of unused or underutilized VA-owned property.

• Lease termination options can include notice requirements, termination penalties, and adjustments to previously established rental terms, among others.
• There is a centralized SFFAS 54 Team within the Office of Finance who will be responsible for VA’s implementation of SFFAS 54.
• Purchase Option – A provision allowing the Government to purchase leased property.
• During this transaction, the initial lease agreement, known as the ‘head lease’, between the original lessor and the lessee remains in effect (IFRS 16 Appendix A).
• At Occupier, we understand the challenges of accounting for partial lease terminations under ASC 842, and our team is here to provide support.

Holdover – A tenancy that is created when the tenant continues to occupy the premises beyond the termination date or expiration date of the lease term. As you can see above both approaches result in similar end values for accounting for lease termination lessor the lease liability and right-of-use asset but the method to arrive at the values is slightly different. If a lease is modified, the lessor accounts for it as a new lease from the date the modification takes effect.

Reassessment of lease classification

As such, on June 1, 2025 XYZ Shipping amended their headquarters lease to now only include one floor. Under the new amended terms XYZ Shipping will not only pay $183,859.38 per month. Based on the information above, XYZ Shipping has calculated its initial lease liability and right-of-use asset to be $11,743,775.88 on June 1, 2023. Initial direct costs are included in the net investment in the lease, with the exception of manufacturers or dealer lessors. KPMG’s multi-disciplinary approach and deep, practical industry knowledge help clients meet challenges and respond to opportunities. At the beginning of year 3, the lease liability was valued at $2,457,000 and the right of use asset $2,500,053.

Partial lease terminations can have a significant impact on the financial statements. The gain or loss recognized from the partial lease termination affects the lessee’s net income, and the adjustments to the lease liability and ROU asset impact the Balance Sheet. It’s also crucial to properly disclose the details of the partial lease termination in the financial statements, including the impact on net income, any gains or losses recognized, and other relevant qualitative information.

Appendix E: SFFAS 54 Local Field Office Quick Reference Guide

Any gain or loss resulting from the partial lease termination is recognized in the Income Statement. An example of partial termination accounting, including the related journal entries will be discussed later on in this blog post. Accounting for partial lease terminations under ASC 842 can be complex, but with proper understanding and adherence to best practices, lessees can ensure accurate financial reporting and compliance with the accounting standard. As a lessee, it’s important to understand how to properly account for partial lease terminations to ensure accurate financial reporting and maintain compliance with ASC 842.