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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