February 21, 2010
Lucernex expert Jim Duport (see Jim’s management summary here) discusses GAAP sublease accounting.
GAAP Sublease Accounting
Summary of GAAP/FASB Accounting for a Loss Associated with a Sublease
Our interpretation of GAAP sublease analysis according to FASB accounting rules is as follows:
Overview: Start by determining the net present value of all rental costs including write-offs of depreciation and subleasing costs, offset by the sublease income (the NPV write-off). The Income Statement (Profit & Loss statement) is then charged the NPV write-off and it is charged an interest expense based on a declining balance of the NPV write-off, the accretion interest expense. The declining balance is determined by taking the net monthly costs (including sublease income) and the interest expense and deducting that cost from the NPV write-off.
Steps are as follows:
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Tags: commercial lease analysis, commercial real estate, Commercial real estate analysis, GAAP Accounting, GAAP Sublease Accounting, Lease Administration software, lease analysis, LseMod, real estate software, sublease analysis :: 3 Comments »
January 31, 2010
Lucernex expert Jim Duport (see Jim’s management summary here) provides this response:
In essence, GAAP (Generally Accepted Accounting Principals) rent is an averaging of the rent over the term taking into account rent abatement and fixed/known rent increases. The rent cost calculated based on GAAP is then charged/booked to the Income Statement / Profit & Loss (P&L) statement. The P&L statement is what is reported to the Securities and Exchange Commission (SEC) and is used for tax purposes. In many corporations, the GAAP rent is also the cost that is charged to the real estate department’s or end-user’s budget.
CPI & GAAP — a CPI GAAP analysis
What happens if there is free rent and rent increases are based on the Consumer Price Index (CPI), a “CPI GAAP analysis”? Since increases are not a “known” value, it is difficult to apply GAAP to a lease with CPI increases.
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Tags: Commercial real estate analysis, commercial real estate software, CPI GAAP Analysis, GAAP, GAAP Accounting, GAAP impact on SOX, GAAP rent, lease accounting blog, Lease Administration software, SOX :: 2 Comments »
