Joined by Suzanne Stephani, a director specializing in cash flows and leasing guidance, and Mark Druslom, a managing director focused on complex lease accounting, the discussion navigates the intricate world of 'day 2' lease accounting. They delve into key topics such as remeasurement events and the significance of lease modifications. Additionally, they clarify subleasing implications and explore right-of-use asset impairments. Their expert insights into managing these complexities ensure that listeners grasp the nuances essential for accurate financial reporting.
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volunteer_activism ADVICE
When To Remeasure Leases
Remeasure leases upon contract modifications, changes in lease term, or purchase option assessments.
Also reallocate contract consideration and update discount rate and asset fair value at remeasurement date.
volunteer_activism ADVICE
Partial Lease Remeasurement Simplified
For partial remeasurement, focus only on revised lease payments without changing discount rate or lease classification.
Update contract consideration allocation if not using the practical expedient; then adjust lease liability and right of use asset.
insights INSIGHT
Lease Term Reassessment Triggers
Changes in market-based factors do not trigger lease term reassessment.
Only lessee-controlled, committed actions that alter lease option likelihood require reassessment.
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We continue our miniseries on lease accounting. In this episode, we discuss “day 2” lease accounting, focusing on lease remeasurements, subleasing, and lease impairments.
In this episode, you’ll hear a discussion of:
01:18 - Events requiring remeasurement
02:17 - Full lease remeasurements
06:19 - Partial lease remeasurements
7:47 - Lease term and purchase option remeasurements
13:44 - Lease modification remeasurements
21:34 - Subleasing arrangements
25:58 - A refresher on ROU asset impairments
For more information on modifications and remeasurements of leases, read chapter 5 of our Leases guide. For more on leases, check out the first episode in our miniseries; it covers lease classification. Additionally, follow this podcast on your favorite podcast app for more episodes.
Suzanne Stephani is a director in PwC’s National Office specializing in the statement of cash flows, as well as the application and interpretation of the accounting guidance related to financing and leasing transactions.
Marc Jerusalem is a PwC National Office managing director specializing in leasing. Marc consults with clients on complex lease accounting issues and is a frequent contributor to many related PwC National Office publications.
Heather Horn is the PwC National Office Sustainability & Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series.
Transcripts available upon request for individuals who may need a disability-related accommodation.Please send requests to us_podcast@pwc.com.
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